In Business as Usual, traditional methods of predicting market demand rely (or forced to rely) on historical demand in some or other form – trends, patterns, moving averages or short term consumption rates. If not wholly, in substantial measure. Some firms manage to go that extra length to build collaborative platforms for gathering everybody’s piece of mind but unfortunately collaboration cannot be taken for granted, esp. when it is external and esp. when there are 10000 partners and 20000 SKU’s and half a dozen sales channels. It is rarely ‘complete’ in all respects. Not always democratic. There can be a conflict of interest that emanates from lack of trust or a shared objective (e.g. what if the firm decides to raise prices or reduce my margins because demand looks too good?). Then there are systemic issues. Useful information may not be available on time even if a ‘solution’ exists to gather the information in real time. Then there are cultural issues viz. reluctance or laziness to collaborate (I am mightier and hence busier than thou). You can’t whip them all the time. Some don’t care about the incentives either. Not when you are not a market leader.
Then there are issues wrt how business is actually done in certain markets. Some ‘partners’ are ‘strong’ only by virtue of geographic presence and not necessarily service focused (you don’t have to when you can offer great credit terms :-)).Then there are technical limitations wrt procuring sales or stock information from point of sale, esp. in a country like India where a vast part of ‘downstream’ technically lives one week behind the urban India in terms of just about everything. Many do not have any systems of record, incl. some BIG retailers. Then there is this whole assumption (the basis of collaboration) that those closer to the customer know better about the market potential. It may at best be a conjecture in many cases. Your business partners may be as clueless as you are!
While there is tremendous value in gathering information closer to the market, notwithstanding the pains involved, what is perhaps more useful and not many care to do is to collect information about the competition on a REGULAR basis. At best this seems to be an ‘Annual’ review affair in most firms. Setting unrealistic targets for following years upon realizing that the ‘humble’ competition has silently eaten into their market share and that too in a declining market! (While my demand graphs showed glorious uptrend in quarterly reviews!)
- How are competitors doing on a day to day basis?
- Against what products in the competition is my product competing? (Cookies can compete with cakes too as long the price differential is not much)
- Who is new in the competition?
- How is competition generating short term demand?
- Which Product in the competition can be considered a Market Leader?…(notwithstanding its availability on shelf).
- What promotions are they running now?
- What is competition’s gain (or loss) in the value and volume share in the recent period?
- What is my gain (or loss) in the value and volume share in the recent period?
- What is the month on month market share (volume and value) snapshot by each player?
- Is the Market generally growing (or declining)? Or likely to grow (or slow down)
- WHO is really my competition? What is the superset of which I am a pie? Against What all products is my product competing with (it may not be in the same ‘category’ for all you know!)
- What is the Price Band in which competition is offering an ‘Equivalent’ product?
- What is the ‘ideal ratio’ of SKU volumes I should plan (demand) for from within my portfolio of products?
- What should I forecast? Unique SKU or some combination of substitute SKU’s? (and then derive my share of likely demand)
- Given the rate at which I am losing (or gaining) to-from competition, what will be my market share 10 years down the line?
Answers to these questions can lead to a complete re-design of demand planning solutions and practices. The emphasis will change substantially. So will be the value addition to the forecasting activity. More importantly the RIGHT kind of expectations are set internally between marketing, supply chain and top management. Rather than being hyper-aggressive (or too complacent). Promotions can be planned with a purpose and for a specific target markets and products. Price discounts can be more meaningfully planned. Demand Planners can make adjustments based on better insights. Product deployment strategies can be accordingly adjusted at the nth hour if needed.
Is this easy to implement? Systemically ? Yes. To a substantial extent with the available tools.
