Demand forecast

Step 1: Expand Your Views on Data

Demand forecasts have traditionally been calculated on
spreadsheets using historical shipment data. But historical
sales data is just one piece of a much larger puzzle; it by no
means represents the full scope of factors that impact sales.
The most thorough forecasting techniques includes
demand-driven data. In other words, forecasts should take
into account consumer purchase behavior in addition to
retailer purchase patterns.
Make no mistake: Historical data is vital to calculating
demand. But demand planning and forecasting for CPG
requires a more robust approach to the kinds of information
that’s available. Those massive data sets extend well
beyond supply-driven demand signals and require tools
that are much more capable than spreadsheets alone (more
on this in Step 3).
Factors that impact brand consumption and forecast
accuracy include:
•market trends
•brand (own) and competitive marketing and trade
investments
•promotions
•historical shipments and consumption data at both chain
and store levels
•weather patterns
•seasonality
•ingredient and health trends
•online search trends
•social media mentions
•other variables that impact brand consumption
Step 2: Know Where to Look
Even though the aforementioned
data sets are readily available,
most CPG brands don’t know
how to correctly utilize this
information and incorporate them
into their business strategy and
forecasting process.
The data sets listed in Step 1 must
be sought out, as most of it comes
from external sources. So what
should CPG brands do once
they’ve collected and
tabulated internal* data related to
historical shipments? Here are
two ideas:
•Enter into connected data
partnerships with market
intelligence firms that specialize
in providing statistics-backed
research and insights into
consumer behavior.
•Have a dedicated data science
team that can conduct deep
research on its own. This is a
business strategy unique to each
company.
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Step 3: Ingest, Clean, and Organize the Data
The number of data points that can affect actual demand is
both diverse and massive. Ingesting and analyzing these data
pools is better suited to machine-learning models run on
enterprise-grade servers that can handle the sheer enormity of
data — rather than, say, an Excel model run by an analyst.
Unfortunately, most CPG brands do not have the
technological infrastructure necessary for this type of demand
forecasting process. Rightly so, they opt to use external 
demand planning platforms that are intuitive and offer a high
degree of automation.
(A note on internal data sets: Historical shipment data, for
example, is often incomplete and imperfect due to a number
of factors, including data siloing, an inconsistent 
SKU strategy, or the use of insufficient inventory
management software. As a result, it’s critical for brands to be
able to track shipments across the entire supply chain and
have 360-degree visibility in real time, especially when
demand planning. A data science team with experience in
CPG is critical to organizing the data correctly.)
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Step 4: Unleash the Data Scientists & AI
Once all data has been ingested and organized, it’s time to find
dynamic relationships between various sets of data. To
accomplish this, a team of data scientists will create
customized mathematical models that overlay both internal
and external data points in search of relationships that would
help to accurately forecast sales. Then, a data science team
iterates these algorithms, molding and shaping and re-
jiggering them until a predictive model is created that meets
and/or exceeds predetermined benchmarks (such as forecast
accuracy or forecast bias). Ideally, these machine learning
models become so accurate that they resemble Artificial
Intelligence in their predictive capabilities.
‍
Step 5: Make Sure the Data Is Easily
Accessible Across Your Organization
Having machine learning algorithms that yield
accurate demand predictions at the SKU-level is
only part of the solution. The insights these
models produce should be paired with intuitive,
easy-to-use software that’s accessible across the
entire organization.
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Key Takeaways
At this point, you’ve got it all. The right data.
The right technology. The right people. The right
software. So how do you leverage these demand
forecasts? How can your company, and the many
areas of your supply chain, benefit from them?
Here are few benefits:
•Operational efficiencies across sales, marketing,
finance, inventory, distribution, and
manufacturing teams
•Reduced working capital
•Better understanding of the ROI of competitive
marketing and trade investments
•Fewer meetings; better S&OP/demand planning
process
•Improved customer service levels
4 STRATEGIES TO MANAGE DEMAND
VOLATILITY

In the last decade, the manufacturing industry has

been dealing with the rising impact of demand
volatility. As its name suggests, demand volatility
is defined by a variation in demand for products
that include rapidly changing and unpredictable
demand. There are multiple reasons why demand
is becoming more and more volatile. That is
because customers’ expectations have changed.
They now expect companies to provide a wider
variety of products at low costs. And they want it
now. 

In 2020, the COVID-19 pandemic has highlighted the

effects of uncontrollable world events on product
demand. Some companies have struggled to meet the
rapidly increasing demand, while others were left with
excess inventory as demands for non-essential items
plummeted. Companies that produce cleaning supplies
and disinfectants labored under the strain of high
demands. Now with schools re-opening in various parts
of the country and the world, the demand is likely to keep
increasing.
Situations like this remind us that manufacturing
companies must be able to quickly adapt to the market’s
demands. When the demand is not met, they risk losing
their competitive advantage in the market and may see
future sales dwindling. 
Strategies that can help manage demand volatility:
•What-If Scenarios:  Scenario planning in a What-If
environment can be a good way to prepare for unknown
situations. This allows you to test the effects of various
changes to the production schedule without disrupting the
current one. You can model how changes in inventory levels
or in the production schedule will affect various KPIs and see
how your company can swiftly adapt to changing conditions. 
•Forecasting:  Ideally, manufacturing companies should be
able to accurately predict customer demand instead of
scrambling to respond to it. However, accurate demand
forecasting can be a challenge when dealing with volatile
demands. One strategy would be to look at past demand and
forecasts to determine your Forecast Accuracy and highlight
whether you need to change your forecasting strategy.
•Adjusting the Planning Horizon:  Another method that can
help manage volatile demands in the market in uncertain
times is to adjust the span of your planning horizon. With
many changes arising each day, it may be helpful to shorten
the span of the planning horizon to be able to update your
production more frequently. As such, you will be able to
respond to those changes.
•Alerts:  High visibility in the supply chain is important.
Planners and schedulers can set alerts to identify when
inventory levels are getting too low to ensure that more of
those items can be procured in time to meet demand.