Demand Management Features and Functions
Demand management systems today have moved beyond the narrow concept of statistical forecasting to encompass both global and cross enterprise trading partner processes. In addition, the real-time nature of today’s business requires that rapid feedback from markets and adjustments to demand assumptions are propagated through the supply chain to improve delivery and cost performance. Demand management means identifying and creating demand (marketing, merchandising, and promoting), modeling (forecasting, pricing, and life cycle planning), and collaborating (communicate, simulate, and create consensus) with the network of trading partners. It also means evaluating results and creating learning cycles where the market, including geographic, demographic, and economic assumptions are evaluated and improved upon to constantly improve the performance of the chain.
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Promotion Planning
Promotion management systems allow organizations to plan promotions with their trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware of are that frequently promotion plans are not integrated into the demand streams; or promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.
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Pricing and Profit Optimization
The pricing and profit module creates a profitable and sellable price for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus abilities to track and report history are equally important to manage pricing activities.
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Forecasting
Reliable forecasts represent not only algorithms, which are appropriate to the business setting, but also are based on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensure that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions.
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Merchandise Planning
Merchandise planning analyzes demand at an item level. It allows organizations like merchants (retailers) to understand demand based on issues like demographics, store locations, shelves, and support to purchasing as well as the positioning of merchandise in the retail channel.
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Life Cycle Planning
Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up nor supplied with excess in later stages. In addition, firms are frequently left with excess inventory during engineer change orders (ECOs) or other product changes as well as end-of-life, due to poor planning and visibility to demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information.
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Consensus Planning
Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-the-dock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecast, one number, upon which the supply chain will act.
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Collaborative Planning
Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the VICS Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points).
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S&OP
Sales and operation planning (S&OP) is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.
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VMI Replenishment
Vendor managed inventory (VMI) replenishment allows the co-management of inventory by both customers as well as the supplier. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, dynamically VMI detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order.
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Event Planning
Event planning for various marketing events became more complex as firms started using a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need fine planning to be successful. Today, systems must move from PowerPoint to strong profit analytics for ensuring market success and return-on-investment.
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Metrics and Reporting
Metrics and reporting capabilities today must be forward-looking to report, but more importantly prevent negative business performance. Beyond having excellent modeling and simulation capabilities, metric systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders.
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Demand Management Systems Architecture
Demand Management tools have unique and high levels of integration requirements.
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Supply Chain Management (SCM) Features and Functions
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