How can SAP IBP help FMCG industry achieve accurate demand forecasting & planning?

By: Krypt Team - May 13th, 2019

Authored by: Vijendra Kargudri

The relevance of demand forecasting & planning for the FMCG industry

The success of any supply chain operation of an FMCG industry depends on accurate demand forecasting, which leads to accurate procurement, production, and supply planning. An accurate demand forecasting helps in proper planning to meet the customers’ changing demands & expectations.

Managers across departments of FMCG industry have to constantly cope with seasonality, a sudden change in demand levels, uncontrolled inventory levels, rough-cut capacity planning, price-cutting manoeuvres of the competition, sudden strikes, and large swings of the economy. Demand forecasting & planning helps them deal with these issues by driving visibility across different departments & processes within and outside the business (supplier, distribution).

Why is demand forecasting & planning necessary for the FMCG industry?

Demand forecasting & planning in the FMCG industry is carried out by using data and insights to predict how much of a specific product the customers will likely purchase during a specific time period. This method of predictive analytics helps FMCG products distributors/retailers understand how much stock to hold on hand at a given time period.

Since the FMCG industry products have a short shelf life, a surplus in stock or shortage at the sales counter due to incorrect forecast & planning can derail the entire supply chain operation and adversely affect the profits.

How can demand forecasting & planning help FMCG industry?

Accurate demand forecasting & planning helps FMCG stakeholders to achieve the following while meeting the customers’ demand for a product:

Improved Inventory

For FMCG industries, accurate demand forecasting capabilities presents with clarity of supply planning. This, in turn, allows them to accurately evaluate the level of their customer demand and thereby ascertain the volume of component parts necessary to successfully manufacture and accordingly plan to supply orders.

Also, having an accurate forecast helps decrease the amount of warehousing or container space and plan supply operations by eliminating loss and significantly reducing the amount of time unused inventory lying in a warehouse.

Reduced Cost

Accurate forecasting & planning reduces any cost associated with materials/components lying unused in the warehouse. It helps reduce cost by providing manufacturers the foresight about any surplus/shortage in stock, necessary to fulfill customer demand.

In addition, it helps reduce the cost associated with several resources & critical production tasks pertaining to ― job allocation & management, sourcing raw materials, logistics, and even some front-office/customer-facing duties. Since forecasting & planning impacts the product life-cycle ― from start to finish, having a more efficient & cost-effective production leads to profitable FMCG company.

Optimized logistics

Forecasting & planning accuracy provides FMCG manufacturers to take a step further in the right direction and systematically examine their transportation strategy. It helps them identify areas where efficiencies can be increased, and redundancies eliminated. Effective logistics offers a quick & efficient way to move products within/outside the FMCG plant. Accurate forecasting & planning allows the manufacturer to see when, where, how, and why the most strategic logistics decisions can be planned & executed to have the desired result.

Increased customer satisfaction

A customer’s satisfaction defines the global market. The successful FMCG industry is about ascertaining the customer has the right product in their hands at the right time, place and delivery means to meet the customer’s expectations. Forecasting & planning is a holistic method of refining, streamlining, and enhancing an FMCG company’s operational, logistics, and production cycle platforms. It promotes customer satisfaction, and company’s growth & expansion in the short, mid, and long-term.

Effective production scheduling

Accurate forecasting & planning gives companies an ability to investigate the future and avoid holding hypothetical product stocks. It helps them to –

have effective production scheduling
meet customer demands & market forces, and
align production with the availability of raw materials and component parts.

As forecasting assists FMCG companies with these elements of planning and production life-cycles, it facilitates them to operate with more agility, transparency, and flexibility. It helps them to adapt to changing production environments or customer demands.

How can Krypt help FMCG industry to achieve accurate demand forecasting & improved planning?

Managers in an FMCG sector must routinely forecast the amount of inventory & supplies needed to meet customer demands. There are a variety of methods an FMCG manufacturer may use to achieve accurate demand forecasting.

As an SAP’s preferred partner for IBP, Krypt can help you achieve accurate demand forecasting & planning by –

correctly defining the product type viz., assemble-to-order or make-to-stock
aligning the entire FMCG Company’s forecasting activities around one common set of statistical data for best results throughout the supply chain
determining the right tenure to forecast & plan for a specific supply chain activity like procurement, production or sales
helping you opt for macro-forecasting that consists of identifying current market trend & how it may change in the future OR opt for micro-forecasting that is concerned with the examination of a product’s share of a specific industry based on the life-cycle of your product(s).

If you wish to know about our products/services, please request a demo or do contact us.