Software that focuses only on the operational side of the supply chain isn't up to the task of adjusting inventory to the actual demand for a product or service. For that, you need demand planning software.
Today's demand planning software automates the analysis of demand indicators such as ERP order and shipment data. It can replace the confusion of non-standardized spreadsheets and memos with an organization-wide infrastructure for dynamic, collaborative planning that brings everyone in sync with a consensus forecast.
Demand planning software always includes:
- Demand forecasting software and forecast management, including statistical analysis and "self-learning" algorithms that try to predict demand. Users can adjust the forecast to reflect their knowledge, customer input, and events such as promotions. Forecasts can be sliced and diced in myriad ways -- for example, by product line, customer, or time period.
- Collaboration, which is typically a web-based mechanism with role-based security for including internal and external stakeholders in the demand planning process. It can also support standard collaboration methods, such as vendor-managed inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR).
The most sophisticated demand planning systems go beyond historical sales and shipment data to include real-time demand visibility and analysis. This advanced demand forecasting software can access point of sale (POS) data to fine-tune forecasts with the latest information. Some modules are dedicated to forecasting demand in specific situations, such as promotions and product launches.
"Demand shaping" provides what-if scenarios for sales bonuses, advertising campaigns, and other deliberate attempts to affect demand. Some vendors also provide performance-management tools for gauging the effectiveness of the demand planning software.
"Demand sensing," an emerging subcategory in demand planning software, uses pattern-matching and statistic analysis to identify the best predictors of demand.
Aligning supply chain demand planning with sales
Demand planning software is a key element in sales and operations planning (S&OP), a strategy for aligning supply chain operations with the demand forecast. More vendors are offering S&OP dashboards or bundling their existing inventory asset management and demand planning software in S&OP suites.
Integrating demand planning software into the S&OP process creates another advantage: getting more employees involved in the activity of improving forecasts through customer input, according to Noha Tohamy, vice president of supply chain research at AMR Research.
Companies are increasingly feeding S&OP data into business-intelligence software, providing a sort of "tuneup" for demand forecasting software, according to industry analysts. Modeling and simulation are also becoming more common, as are the use of analytics and real-time event management in S&OP.
Most of these demand planning modules are available in ERP, SCM and S&OP suites or as standalone software that can usually integrate with the suites. Some are available as online services that can be implemented piecemeal. And vendors of business analytics and business intelligence software have gotten into the act with demand planning software and S&OP suites of their own.
They must be seeing something in the forecast.
About the author: Freelancer David Essex has covered information technology for BYTE, Computerworld, PC World, and numerous other publications and web sites.