Although warehousing companies have used the recession to secure rock bottom deals on strategic real estate, supply chain services vendors continue to invest heavily in sophisticated business intelligence programs that can help them determine how to do more with less space. "Demand sensing" is the catch phrase assigned to a variety of tools that vendors hope can minimize waste and improve efficiency, especially in shared warehousing environments. Some practitioners have taken the trend even further by using a combination of tactics and policies to help shape the amount of traffic flowing through third party logistics operations.
At many supply chain services vendors, increasing the frequency of forecasts holds the key to implementing effective demand sensing policies. Companies accustomed to forecasting inventory demands over the course of a quarter may enjoy some cost benefits when manufacturing large quantities of products and parts. However, studies increasingly show that smaller batches of orders placed strategically throughout a quarter can often save companies even more money by responding more accurately to customer demand.
Weekly Forecasting Helps Supply Chain Services Customers Save Money
In an organization that must respond quickly to customer demand, forecasters can break down estimated inventory needs into weekly requests. Third party logistics vendors can collaborate with client company analysts to determine the safety inventory levels. Planned correctly, warehousing operations will store sufficient product to meet sudden, unexpected demand without overstocking. As analysts get more aggressive in their predictions, client companies can save money on shipping and storage fees while reducing the risks and liabilities inherent in maintaining large inventories.
Making accurate inventory predictions often requires the kind of insight offered by third-party supply chain services providers. Running impartial projections through the filter of experience, third party logistics companies can eliminate much of the guesswork and speculation from inventory estimates. Instead of working from lofty marketing goals, logistics teams can use raw data from customer research and from broader industry trends to prevent their clients from overstocking crucial items.
Demand Sensing Relies on Backup Supply Chain Services
Some company leaders fear the prospect that demand sensing may cause warehouses to empty prematurely, citing examples like the popular Nintendo Wii gaming system that frequently failed to appear at retail stores after its launch. Unprecedented demand caught the manufacturer by surprise. However, marketers at the company managed to leverage their supply chain challenges into sales strategies. By redeveloping supply chains based on market demand, Nintendo enjoyed a combination of forced scarcity and streamlined fulfillment that nearly eliminated warehousing needs for the first two years of the devices history. By shaping demand, instead of merely sensing it, company leaders and third party logistics providers shaved costs and made the Wii one of the most profitable electronics product launches in history.
No company leader wants their warehousing operation to run out of inventory. Therefore, demand sensing and shaping relies on modern, efficient manufacturing and shipping solutions to pick up the slack in cases of extreme customer demand. The ability to shift inventory from replenishment to replacement gives companies the security of an acceptable solution for the majority of customers. When those cost savings trickle down to cheaper goods and services, both shareholders and customers benefit.
Sources
CIO
EE Times
Infosys
