Retail demand planning and facing a future of continued transformation

What are the key considerations for supply chain leaders in 2021 and beyond?

As we adjust to the new normal of life and business during the COVID-19 pandemic and beyond, one thing is certain: the supply chain is top of mind for anyone in retail. The question is, how do retailers prepare for the next wave of disruption? Right now, most retailers are evaluating their capabilities for forecasting and replenishment. They’re finding that in today’s world, it’s tough and nearly impossible to navigate without the advanced analytical abilities that come with solutions leveraging AI and machine learning. Before the pandemic, we published Is your supply chain missing half the customer forecast? This paper explored the issues retailers face when using disconnected demand forecasting systems and how that leads to an incomplete view of customer demand. Retailers are looking for ways to move the “maturity needle” forward. To do this, they must address the complexities of demand planning, and that requires a combination of the right technology, process and people.

The 2020 Gartner report, Retail Demand Planner 2025: From Creator to Curator, released November 2nd, does a great job of calling out some of the key areas that retailers need to consider now to prepare for the future and redefine their demand planning process.

Gartner believes that by 2025, how retail organizations approach, develop and consume demand plans will look dramatically different than it does today. Central to retailers planning transformation will be the migration to or implementation of a single, centralized planning platform (see Figure 1).”

Mike Griswold, Retail Demand Planner 2025: From Creator to Curator

I’m proud that Symphony RetailAI can support retailers to transform by aligning their people, process and technology to advance in maturity. From our experience working with the retail supply chain, as well as my own experience, I think there are three primary things for retailers to consider when assessing how to drive these improvements.

Three demand forecasting “must-haves” for retailers today

1. Using data intelligently as a backbone to inform all supply chain roles

Demand forecasting supports and drives the entire retail supply chain and those systems must be designed to help retailers fully understand what their customers want and when. Most demand forecasting systems are not underpinned by a true retail data management system that cohesively provides insights and visibility to all supply chain roles, enabling shared forecasts across the entire value chain.

The biggest gap today is data/granularity that lacks clean data lakes and/or standards. Point of sales are misaligned, there are gaps in attributes, multiple data sets are used (often, architecturally different) and it takes a long time to enrich data, something that demand planners spend a huge amount of time doing. How can a retailer move toward true forecasting and better accuracy without good data management to serve up data via intelligent science containing the required insights? Data processing can be done with AI and machine learning, but also needs to be underpinned by excellence in data governance. There must be a solid data management process in place to support the entire supply chain ecosystem, which of course, includes forecasting.

Forecast accuracy has a direct impact on cost and revenue, inventory level, waste, out of stocks, and missed sales. These things are critical to organizations. Demand planners can be truly strategic, offering the organization significant transformation when empowered with the data and forecasting systems that curate insights and lead to increased profit.

Planning Evolution Requires MDM Commitment MDM disciplines must become more mainstream for retailers to complete their demand-planning transformation by 2025. Gartner defines MDM as: A technology-enabled discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency and accountability of an enterprise’s official, shared master data assets.”

Mike Griswold, Retail Demand Planner 2025: From Creator to Curator

2. The new world of retail requires a new approach to true demand forecasting 

Legacy systems using only historical sales data and that are not designed to fit together to unify the end-to-end supply chain result in gaps that lead to costly errors in the demand forecast. Retailers must understand that old methodologies no longer can keep up with the demand of today’s consumers. As we covered in our paper, Leverage AI to future-proof the retail supply chain, future-ready systems must be scalable and intelligent, provide actionable insights from all data sources – internal and external  – and be able to perpetually adapt to new market changes, no matter how fast and unexpectedly they occur. This approach enables the demand planner to evolve to a more strategic role in the supply chain.

Automation enabled by AI/ML, such as purchase order (PO) generation and exception management, provides the path to move from creator to curator. Automation will also shift the structure of planning organizations. The dynamics and balance of execution and orchestration will dramatically evolve as we approach 2025.”

Mike Griswold, Retail Demand Planner 2025: From Creator to Curator

3. Take off the blinders and see the entire landscape

Retailers today must have a holistic view of how all categories are interconnected. The effects of shifting category choices by consumers, in-store and ecommerce, varied distribution channels, promotions, and stratification have a major impact on the supply chain.

Even before COVID-19, 52% of retail supply chain executives said they spend too much time data crunching. Demand forecasting systems that include AI and machine learning drive continuous improvement of demand and forecast accuracy. AI can leverage massive sets of information from all data sources to help you achieve a clear picture of true demand, moving your organization to new levels of maturity. However, It’s not a magic bullet without understanding the people and process involved. Symphony RetailAI advises that you look at the entire landscape – and to do this, strong master data management and demand forecasting must be a foundational part of your strategy.

Are you ready for the demand forecasting challenges ahead?

In this new supply chain landscape, retailers must do some soul searching and strategic planning to understand where their growth paths lie. From there, they can begin to evaluate how their current forecasting and replenishment solutions are serving them, as well as how they can look to update, expand and unify the systems that are essential to meeting their business goals and successfully meeting their customers’ needs.

Learn more about the key focus areas for retailers in 2021 and beyond in our recent podcast.

Visit Gartner.com to learn more about the report.

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