Disrupt demand – from MHD magazine

Tom Enright

Highly predictable future demand is the dream of most supply chain executives, all striving for an effective end-to-end supply chain. Companies have long struggled with average forecast errors of more than 27 per cent, according to a Gartner survey.
This challenge will only become tougher as supply chains become increasingly disrupted by new competitors, new business models and digitalisation. Demand will also shift to parts of the world where companies don’t have mature infrastructures.
You’ll need to improve your demand-sensing, shaping and forecasting capabilities to be successful. Move away from owning assets. Instead, move toward accessing and using them through implementing more collaborative supply chain network designs.

“You’ll need to improve your demand-sensing, shaping and forecasting capabilities to be successful.”

New opportunities to better predict demand
The sheer volume of data currently available is greater than most current demand technology can absorb and use for effective insight and decision making. This data needs to be used in a different way than it is today to improve demand planning and forecasting.
Improving demand accuracy is now intrinsically linked to the use of analytics to recreate the environment in which historical demand occurred. This means including more inputs than those of sales, inventory and variable prices in statistical forecasting today, which don’t sufficiently create a comprehensive set of attributes that influence historical demand.
Instead, elements such as weather, social commentary, demand transfer, competitor pricing, and shipping and returns policies need to become inputs to demand calculations. All of these influence how customers purchase, whether in B2B or B2C environments, across multiple industries. All of these elements should be considered when predicting future demand.
This new set of data inputs need advanced machine learning algorithms to learn from richer historical data to sense demand, predict and prescribe action. Unlike statistical forecasting, a machine learning approach uses a wider variety of data inputs, which can produce a more accurate demand plan.
Viewing technology as a source of competitive advantage is critical to understand the impact of disrupting demand for people, products and services, as well as appropriately reacting to it.

“Wealth and demand for products and services will increasingly shift to parts of the world where companies lack mature infrastructure in terms of sales, supply and recruitment.”

Participate in trading partner networks
To gain new insights from the proliferation of data and increase demand management performance, you’ll increasingly need to pool resources with other partner companies in your extended supply chain.
Each company will play a role in this network of suppliers and service providers, sharing people, information and technology. Rather than extracting value from its own asset, your company will gain value and advantage using data, people, technology and services belonging to others. Isolated companies will become weaker in influence in the overall supply chain.
The need to develop multi-enterprise collaborative supply chain infrastructures will define the future of supply chains across global industries. Extracting value from information, assets and people will no longer be based on ownership, but instead on accessibility and usage.
The sharing of supply chain assets will be accelerated by the emergence of digital platforms across manufacturing, warehousing and logistics. Ecosystems as a platform have been emerging for many years.
Cars have evolved to become platforms, for example, delivering a customer experience that draws on a cross-industry ecosystem of partners, from the car manufacturer to companies that specialise in communications, entertainment and navigation.
What’s new about ecosystems today is the infusion of digital connections, combined with the fact that they’re delivering digital products.
Forces such as globalisation, government pressure, network capacity constraints, freight margin reductions and increased outsourcing will drive companies to explore how to become more efficient in using their networks and resources across their ecosystem platforms.
Most companies will need to leverage an asset-light network that enables them to be flexible and timely in a cost-effective manner. Instead of looking internally and only optimising your own assets, connect with an ecosystem of third parties to share assets. This builds more responsive supply chains.
Individual customer orders will be fulfilled by whatever combination of partners meets the demand requirements at the time of execution.
Keep ahead of market forces
A global shift in population growth, wealth and workforce resources requires better demand-sensing and shaping capabilities.
Wealth and demand for products and services will increasingly shift to parts of the world where companies lack mature infrastructure in terms of sales, supply and recruitment. It’s likely we’ll see a large increase in purchasing power in less-developed countries in the coming decades.
These shifts in economic power will change demand and potentially how customers will buy. Will they want value products, or will demand for more choice and for premium products increase? Will they buy in urban stores, rural locations or will most purchases be done online?
Companies that fail to take action will find their existing markets declining in terms of spending power and as older consumers age.
Advanced analytics technologies – spanning predictive and prescriptive analytics – are playing an important role in helping companies to keep ahead of these market forces. The impact on supply chains is significant.
Predictive analytics are undoubtedly a powerful competency that enable companies to be proactive and take advantage of a future opportunity, or mitigate or avoid a future adverse event.
Prescriptive analytics on the other hand can improve decision making in functional areas like supply chain planning, sourcing, logistics and transportation. More importantly, prescriptive analytics can be deployed to improve the supply chain performance by recommending course of action that best manages trade-offs among conflicting functional goals.
Tom Enright is a VP analyst at Gartner, specialising in supply chain strategies and operations across the retail sector. His focus areas include distributed order management, in-store logistics and last-mile fulfilment. For more information visit www.gartner.com/supplychain.

Goodman Group welcomes rising consumer expectations

Goodman Group has announced its results for the full year ended 30 June 2017, delivering an operating profit of $776 million, up 8.6% on FY16.
Goodman, an integrated commercial and industrial property group, owns, develops and manages real estate including warehouses, large-scale logistics facilities, business parks and offices globally. It is the largest industrial property group listed on the Australian Securities Exchange.
Commenting on the result, Greg Goodman, CEO, Goodman Group, said, “Our FY17 operating profit of $776 million is the result of strong operational performance and the deliberate repositioning of our business over the last three years.
“Having positioned our business to take advantage of structural changes, we’re now looking to the future. Rapidly advancing technology and increased consumer expectations around price, product availability and delivery – while disruptive for some businesses – are providing us with opportunities.
“Although the evolution of e-commerce and supply chain transformation are still in their early stages, we are seeing increased demand for our expertise in providing high-quality logistics facilities in prime locations. This is a trend we expect to accelerate over the next five to ten years.”

Supply chain event to inform omni-channel strategies

In an increasingly connected and transparent world where global economic integration and disruptive technology places tremendous stress on supply chains, it is critical for ANZ organisations to develop a smarter and more agile supply chain strategy.
With supply chains constantly evolving to meet the ever-changing expectations of ever-more sophisticated and demanding customers omni-channel customers, it is challenging to balance efficiency, performance and cost while investing in the right technology and tools required to succeed.
The Supply Chain Planning & Innovation Summit 2017 will tackle these challenges by combining best practices, and thought leadership case studies with interactive discussions for problem solving, idea exchanges and debate on the hottest topics in end-to-end supply chain planning and technology innovation.
An exciting selection of over 30 speakers has been confirmed, sharing insight from companies such as Coca-Cola Amantil, GSK, Kimberley-Clark, the Australian Logistics Council, Clarins, kikki.k and Dulux Group.
Click here to download the full programme.
The three-day event will focus on developing transformational strategies to improve demand and forecasting accuracy, the impact of disruptions and avoiding costly mistakes, how to adopt a real-time collaborative approach with vendors, partners and customers, the use of demand-sensing tools to improve demand and forecasting accuracy and supply chain trends and how businesses can prepare for future innovation.
The event will take place 29–31 August 2017, at the Pullman Melbourne, Albert Park.
Logistics and Materials Handling readers can receive a 10 per cent discount off the current early bird rates by referencing VIP code EFXLM1.
Click here to register online.
For more information or to register on, contact Akolade on 02 9247 6000 / registration@akolade.com.au

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