This is probably not a surprise but supply chains are inherently multi-enterprise. Despite this, companies have tried to manage their supply chain with ERP systems which fully represent only their own facilities. While this might have worked with Ford’s River Rouge plant, where iron came in one end and cars went out the other, it is not a viable approach today. Supply chains need to be real-time and extend to include customer, co-packer, supplier and suppliers’ suppliers networks. As a result, many companies are turning to demand sensing.
Limitations of Traditional Supply Chain Management Solutions
Traditional demand planning systems are essentially mechanical calculators without the ability to learn. They employ time series analysis to create forecasts based solely on prior sales. We all know that history is a poor predictor of future sales, especially in volatile markets. The increased reliance on innovation and promotions to drive growth further compounds the problem. New items lack the two years of history required for time series techniques – no one should have to wait two years to forecast a product – and promotions by nature are designed to ensure that history does not repeat itself.
Why Leaders Are Adopting Demand Sensing
Demand sensing uses current information from across the supply chain to create accurate forecasts that are in tune with market realities. Automated pattern recognition algorithms analyze the current signals to determine what data is predictive and then creates the best possible forecast. Campbell Soup was the first company to adopt demand sensing in 2003. Three years later, Procter & Gamble started its global deployment. Today, demand sensing is being used in over 160 countries by some of the world’s largest companies. Data from E2open’s Forecasting Benchmark Study – encompassing more than $250 billion in sales from 14 multinational manufacturers – shows that demand sensing cuts weekly forecast at the item-location level by 37% compared to traditional demand planning systems.
The Future of Supply Chain
In the next 5 to 10 years, we will see:
- Increased complexity, shorter lead times and financial pressures to improve productivity.
- A wider realization that ERP’s inside-out approach is a bottleneck to profitably serving customers.
- Companies rethinking networks from outside-in, and encompassing all trading partners in the extended supply chain, from retailers to suppliers.
- Automation in planning that will augment human efforts, harnessing the masses of data required to accurately predict demand.
- Collaboration with retailers becoming automated, enabling cooperative inventory target setting across the value chain to serve more customers with less capital invested in stock.
How the Acquisition of Terra Fits With E2open
The merger between E2open and Terra Technology creates the first opportunity for true end-to-end synchronization across the extended supply chain. E2open has the world’s largest supply chain operating network with over 40,000 trading partners and is a leader in supply chain planning and execution. Terra is the industry leader in demand solutions, including demand sensing, inventory optimization and transportation forecasting. Combined, E2open is uniquely positioned to power a new generation of multi-enterprise supply chains that dynamically sense consumer demand, understand supply constraints and quickly react to profitably serve customers. The benefits of an automated and connected value chain network are staggering.
For more insight, you can read the full article from Food & Drink Technology here.