Executive Briefings

Forecasting & Demand Planning: Enabling Sell-Side Collaboration

Analyst Insight: Companies no longer have the luxury of being able to expend significant resources to have a multi-phased demand management process and technology roll-out. They need to be laser-focused on the right mix of processes and tools suitable to their unique environment. The two key determinants are: type of supply chain and the planning window.

Traditional approaches of solely focusing on being demand-driven from a demand planning (statistical forecasting) perspective are not adequate. Companies must balance demand planning with short-term responsive strategies. Aberdeen's report, Demand Management: Enabling Sell Side Collaboration and Increased Revenue, highlights specific approaches that companies with different types of supply chain - build-to-stock, build-to-order and engineer-to-order - need to adopt with respect to demand management.

Industry Average and Laggard companies are still focused on an internal collaborative approach towards demand management. They still focus on demand forecast accuracy as the key metric for managing the process. This approach is suitable for build-to-stock kinds of environments but not for build-to-order. Best-in-Class companies are focusing more on customer forecast collaboration and creating a more responsive distribution strategy whereas Industry Average companies are much more focused on demand forecast accuracy. Best-in-Class have realized the need to increase  collaboration in the demand network to improve sales revenue (sell-through and sell-in).

Two areas where we see differentiation for Best-in-Class companies with respect to technology are:

• Best-in-Class companies are 1.6 times more likely to adopt best-of-breed demand management systems

• Best-in-Class are 30 percent less likely to be using spreadsheets for solving demand management problems

The Outlook

The current software mix is skewed towards demand planning types of solutions. Only 14 percent of companies indicated that they don't plan to use statistical demand forecasting versus 48 percent that don't plan to use sell-side demand visibility software. However, these solutions are inadequate for solving the gamut of issues that companies face. The solution mix should be more balanced across some of the other categories, such as promotion planning, sell-side collaboration, demand visibility and demand sensing. That ensures that demand plans can be adjusted based on external market factors both in the long and short terms. Promotion planning results in the incorporation of promotion events that can influence demand. Demand sensing solutions can obtain real-time customer purchasing trends and influence demand. Sell-side collaborative solutions can help companies to factor in near-term trends essential for companies to understand before stocking up on inventory.

Traditional approaches of solely focusing on being demand-driven from a demand planning (statistical forecasting) perspective are not adequate. Companies must balance demand planning with short-term responsive strategies. Aberdeen's report, Demand Management: Enabling Sell Side Collaboration and Increased Revenue, highlights specific approaches that companies with different types of supply chain - build-to-stock, build-to-order and engineer-to-order - need to adopt with respect to demand management.

Industry Average and Laggard companies are still focused on an internal collaborative approach towards demand management. They still focus on demand forecast accuracy as the key metric for managing the process. This approach is suitable for build-to-stock kinds of environments but not for build-to-order. Best-in-Class companies are focusing more on customer forecast collaboration and creating a more responsive distribution strategy whereas Industry Average companies are much more focused on demand forecast accuracy. Best-in-Class have realized the need to increase  collaboration in the demand network to improve sales revenue (sell-through and sell-in).

Two areas where we see differentiation for Best-in-Class companies with respect to technology are:

• Best-in-Class companies are 1.6 times more likely to adopt best-of-breed demand management systems

• Best-in-Class are 30 percent less likely to be using spreadsheets for solving demand management problems

The Outlook

The current software mix is skewed towards demand planning types of solutions. Only 14 percent of companies indicated that they don't plan to use statistical demand forecasting versus 48 percent that don't plan to use sell-side demand visibility software. However, these solutions are inadequate for solving the gamut of issues that companies face. The solution mix should be more balanced across some of the other categories, such as promotion planning, sell-side collaboration, demand visibility and demand sensing. That ensures that demand plans can be adjusted based on external market factors both in the long and short terms. Promotion planning results in the incorporation of promotion events that can influence demand. Demand sensing solutions can obtain real-time customer purchasing trends and influence demand. Sell-side collaborative solutions can help companies to factor in near-term trends essential for companies to understand before stocking up on inventory.