We know how important our demand planning function is to ensuring operations are timely, efficient, and cost effective. We want to ensure product availability to maximize revenues in the marketplace.
Effective demand planning can guide users to improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and enhance profitability for a given channel or product.
The approach begins with a statistical forecast. Data sources for the forecast include planned sales orders, customer contracts and intercompany standing orders. Pieces of information obtained in this way are used to take decisions aimed at sales increase.
Of course, depending on the individual company, there may be additional questions that need to be answered. For example, in today’s highly competitive market, driven by demand consumers want more choices and better products. These contributes to the greater than ever number of products and product lines, making management of their demand more complex, increasing working capital to maintain safety stock, obsolete inventory, and increasing cost of production. This is why it is important to rationalize products and product lines and manage most effectively their demand.
Pat Bower from Combe Incorporated discusses in detail the process of product portfolio optimization in the framework of new products. How new products should be filtered from ideation to development and, after launch, how they should be leveraged. Their window of opportunity is very small; most CPG products flame out within the first year of their existence, says Pat.
Mark Covas from Coca-Cola suggests companies should divest low margin brands, no matter how big they are. Many companies such as ConAgra Foods, General Mills, Procter & Gamble, and Estée Lauder are doing it. This increases productivity taking funds away from low performing brands and giving to high performing ones.
Greg Schlegel from SherTrack LLC. categorizes customers into four: 1) Champions, 2) Demanders, 3) Acquaintances, and 4) Losers. He then describes a strategy for dealing with each one of them. Greg Gorbos from BASF points out hurdles, political and others, that stand in the way of implementing the optimization policy, and how to deal with them. Communication is another issue Greg points out. The company may decide to deactivate a product, but information about it is not communicated to all the functions. Jeff Marthins from Tastykake talks, among other things, about the exit strategy. He says that we cannot deactivate a product without knowing its inventory position, as well as holding of raw and packaging materials for it.
For survival and growth in today’s atmosphere, it is essential to streamline the product portfolio to reduce costs, and increase revenue, profit, and market share.
María García Bufill
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