Demand Management

Understanding, forecasting, segmenting and shaping demand

When it comes to matching production with customer demand, the biggest headaches are often self-inflicted. To meet sales targets, marketing pushes end-of-quarter promotions, training customers to wait for discounts and stockpile product. High-volume order policies decrease order frequency and further contribute to demand volatility. Sales and operations managers "tweak" or outright ignore statistically-based forecasts. The factory runs large batches to maximize equipment utilization then it has to shut down production lines for weeks or even months when sales fail to materialize.

 

LVC Demand

Demand management helps you see true customer demand. It allows you to forecast at the product family and SKU levels so you can better plan resources and capabilities. Customer point-of-sale drives execution and replenishment. Through demand segmentation, you understand the volume and frequency of demand patterns, and you shape demand by taking advantage of more agile order fulfillment. This means addressing customer-facing policies such as promotions, pricing structures and delivery frequencies that create demand volatility.

 

Pain Indicators

Benefits of Lean Demand Management
  • Erratic, unpredictable customer demand
  • Poor forecasting accuracy and high inventory carrying costs
  • Production not in flow with actual demand
  • Lower capital and capacity requirements
  • Gain valuable customer insights
  • Improved relationships with customers
  • Improved service responsiveness
  • Decreased obsolescence
  • Decreased working capital requirements
  • Reduced inventory levels
  • Value chain activities are synchronized with actual demand
  • Reduced lead times

 

Case Example: Packaging company syncs operations and order fulfillment to customer demand

One TBM client has begun to break free from its traditional supply chain structure. Customer demand drives replenishment, pulling product from the distribution centers and factories. Manufacturing is no longer churning out highly volatile product in large batches. Forecasts aren't based exclusively on historical data and salespeople's hunches. Inventories are on the decline, fewer items are out of stock and there's less obsolete product in the distribution centers.