2021 was plagued with shortages. As discussed in clients’ demand planning/ forecasting meetings, history is not representative of the future. In one example, the client experienced material shortages and couldn’t sell what customers requested, and so carrying that forecast into the New Year would deliberately carry that issue into 2022.
In another client example, sales were higher in the first quarter last year because they were able to absorb one-time customer orders because they had stock whereas their competition did not. The one-time sales orders shouldn’t be carried over to the New Year although if they were able to convert part of the orders into new business, some of volume should. Across the board, the timing of sales were off due to widespread shortages, and so using historical trends by month will not achieve results. So, how can we get a handle on future demand?
What Should We Consider and/or What Impacts Could Arise?
Of course, the answer is “it depends”. There are several strategies to evaluate depending on the situation:
- Historical growth rates by customers / groups of products
- Sales quotes
- Sales feedback / CRM insights
- Customer feedback/ demand data of the end customer
- Marketing insights
- New product development/ R&D
- Inventory agreements
- Customer contract agreements
Create a directionally-correct forecast in collaboration with a cross-functional and perhaps cross-company team. Look out a minimum of 3 months in greater detail (item/ machine grouping level) and 12 months in higher level detail (product groupings). If you have customer contracts beyond 12 months, go out further. The key is to make it a rolling forecast.
Customers are getting frustrated with shortages and delays. Take the opportunity with the New Year to get a handle on demand so that you can better serve customers and grow the business. Proactive and resilient companies will thrive, and the rest will fade. Consider implementing a SIOP (sales, inventory and operations planning) process including a comprehensive demand planning process to become one of the winners.
Please keep us in the loop of your situation and how we can help your organization successfully navigate the current volatility and, more importantly, emerge above and beyond. Several of these types of topics are included in our eBooks such as The Road Ahead: Business, Supply Chain & the World Order.