Listening For Demand Signals

Listening For Demand Signals

September 14, 2016

In a previous post we talked about ‘The Digital Transformation’ in retail and the need for a ‘digital core’ to help retailers better respond to the changing requirements of consumers. It calls for retailers to get more specific about defining data that is mission critical and then having the ability to act on it in real or near real-time. Along those lines, it goes without saying that demand would be a key part of every retailer’s ‘digital core’. It also goes without saying that the historically linear supply chains that most retailers are still operating with, can’t be as responsive or demand-driven as is now required for a more customer-centric demand network. Yes, gone are the days that demand can be based on prior sales forecasting and localized assortments alone. Yesterday’s customer who walked into a store and found just the set of dishes they were looking for, now may wish to have that same set of dishes delivered to their home rather than lug it to their cars and then have to lug it into the house when they get there. Their demands are changing and retail must find a way to keep up with if not get ahead of them.

To do so means being able to identify the demand ‘signals’ and then be ready to adapt and accommodate as needed. Today’s consumer lives in a digital economy which should make it easier for retailers to pick up their signals however, the trick is knowing where, when and how to look for them. You see, these signals can be both structured and unstructured, from customers placing orders to making comments in social media. However, the ability to capture this data and analyze it is key to getting closer to the customer and gaining a clearer picture of real-time demand. So, retailers need to figure out where, when and how to sense and respond to changes in demand in real-time in order to keep up with the high customer demands. They must also learn to forecast in an environment where variability is such a large part of the buying process. As part of the move to a customer-centric demand network, retailers will need to enable an agile and responsive supply chain to support the demand changes as well.

Smart retailers are learning to leverage big data to sense and predict near real-time (or short-term) demand. New techniques that use pattern recognition coupled with the statistical forecasting algorithms are also being used to produce a more accurate picture of near real-time demand. This will provide retailers with information they need to make better decisions about where to place inventory. It is imperative to have the right products, at the right place and at the right time to remain competitive. Not tomention the positive impact on both customer satisfaction and that capital investment gained by avoiding the high cost of out-of-stocks and over-stocks.

Some retailers are even looking downstream to enhance their demand projections. Being able to tie the short-term supply execution with actual downstream consumption, like POS, eCommerce and social media data, is also a growing capability that Gartner calls ‘respond planning’. The use of demand-sensing technology that leverages downstream data will provide for more accurate demand projections going forward. Many are turning to tools such as Demand Signal Repositories (DSR) to do this. Def: DSR is a database that aggregates sales data at the point of sale (POS and eCommerce) with other syndicated and internal data allowing companies access to a more complete view of their retail performance. The repository itself is a database that stores the information in a format that allows for easy retrieval of information so that users can quickly query the database to identify what’s selling, where, when and how. Leveraging that data with analytics to identify both short-term and potential impact.

Today’s new, demanding customer is changing the way that retailers sense and organize to meet their requirements. Listening for demand signals, reacting through an agile supply chain and ‘respond planning’ are topics every retailer needs to be on top of. Keep in mind that moving from a forecast-driven model to a demand-driven responsive one will involve much change. Supply chain leaders may want to start with a well thought out business case to use as a pilot. Once the pilot has proven the business case and lessons learned, the roll out to other parts of the business will be much easier to deal with. Demand planning is no easy task but a necessary one for success in this omni-channel world.