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Benefits and Drawbacks of Demand Management vs. Demand Sensing

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One of the new buzzwords in the demand planning arena is demand sensing. Developed around 2003, demand sensing has slowly been grabbing the interest of the CPG, energy, food, beverage, and chemical industries. Often viewed as an alternative to demand management, demand sensing is anything but. Let's compare the two.

The purpose of demand management is to devise a manufacturing plan aligning supply and demand. Demand management consists of coinciding processes that include: sales and operations planning, demand planning, statistical forecasting, sales plan reconciliation and key performance indicator monitoring. These activities tie together to help demand planners achieve a realistic demand plan dictating how much product is manufactured and procured within an organization. In turn, operations use the demand plan as the main driver for annual operational planning within plants and distribution centers.

Demand sensing is a program usually sold by a third-party vendor that uses proprietary heuristics to improve the short-term results of demand management. Demand sensing is applied to the short-term forecast and automatically adjusts the consensus forecast within a 4- to 12-week time frame. The main purpose of demand sensing is to improve forecast accuracy slightly outside of lead time to help prevent unwanted product from reaching the inventory pipeline. Demand sensing also provides visibility to variations in supply and demand allowing an organization to prevent out-of-stock situations due to overselling product. Demand sensing does not generally incorporate the total supply chain, but focuses on select products and customers...Read more on supplychainbrain

Last modified on Monday, 18 November 2013 10:17

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