02/13/2020 | Press release | Archived content
Studies have shown that, on average, demand sensing reduces forecast error by up to 50%, increases inventory accuracy by up to 20% and optimally deploys downstream inventory. The typical performance of demand sensing reduces near-term forecast error by 30% or more compared to traditional time-series forecasting techniques.
Here are some examples of appropriate data sources for building a better short term, demand-sensitive forecast:
Internal sources
External sources
For Logility, demand sensing resides inside the demand planning process. In fact, demand sensing uses the consensus demand plan as an input. First, Logility uses machine learning forecasting techniques with pattern recognition algorithms, automated workflow, and scenario testing to monitor short-term demand. Then, using machine learning to interpret a range of demand inputs, Logility senses changes to the plan and reacts by making forecast and inventory allocation adjustments.
Some of the benefits companies can experience from demand sensing include a 5-10% improvement in cycle time and on-time delivery, a 15-40% improvement in short-term forecast accuracy, a 50% reduction in Days Inventory On Hand, and improved market responsiveness, higher service levels and less obsolescence through more effective allocation decisions.
Is Demand Sensing Right for Your Business?
As you assess the relevance and benefits of demand sensing for your supply chain, ponder these points:
Many studies have shown that demand sensing can improve short-term forecasts versus traditional time-series forecasting methods. The accuracy of the latter is capped based on the fundamentals of information theory, and the 'perfect fit' forecast is not a function of computing power. Remember, long-term production planning is strategic and necessary. Consider demand sensing for short-term tactical gains.
Companies with supply chain agility and quick-response capabilities are in the best position to leverage a demand sensing investment. Because demand sensing typically operates well inside production lead times, look first for improvements in inventory allocation.
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