Expert Insight: Guest Contribution

By Eric Peters,


Date: December 5, 2009

Executing to True Demand


It is More Critical Than Ever That the Product is On the Shelf, In the Right Condition, At the Right Place and Priced to Meet Consumer Demand

Thirty percent of the time, the shopper does not know what brand they are going to buy until they are standing at the shelf. An empty shelf is a lost sale. But that is more than one lost sale. Retail ordering systems will notice that sales are dropping, but not a reason why. Because future retail orders are influenced by recent sales patterns, the retail orders get reduced. And then, you enter into a sales death spiral that is difficult to reverse. Smaller orders equate to lower service levels at the shelf, lower service levels result in more lost sales, and so the cycle goes. It is more critical than ever that the product is on the shelf, in the right condition, at the right place and priced to meet that consumer demand.

Demand Planning Systems In The Market Today


Most demand planning systems and processes in the market today evolved before the widespread availability of shelf level information. Even though many of the systems allow forecasting at the major customer level, the forecasts are based on historical information, together with high level human input. They do not have the ability to utilize the real time visibility provided by retailer data and incorporate that data to make adjustments in the short-term forecast. They are slow to react, causing lower service levels and higher inventory. They do not comprehend which levers to pull to respond to the retailer and consumer decisions – the ability to influence the retailer’s forecast, pricing, and replenishment parameters, the ability to utilize store presence to make adjustments at the store and the ability to utilize VMI relationships to react faster to shelf level changes.

Taking Advantage Of New Information and Opportunities


To take full advantage of this new information and these new opportunities, companies must be able to understand “what is the true demand versus the sales history of an item." How do you intelligently manage inventory in the tightest band, while maintaining the highest levels of service? What are the root causes of problems and how do you quickly react to resolve these problems? And of course, how do you create the most accurate daily forecast of item demand at the store, at the retailer distribution center, and at the manufacturing distribution center? By taking shelf and retailer demand information and driving it back through the supply chain, you truly can improve your chances that the shopper will buy your product when they are standing at the shelf.

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About the Author

Eric Peters is CEO of TrueDemand, a supply chain software provider.


Peters Says:

Companies must be able to understand “What is the true demand versus the sales history of an item."

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