The panic buying and consumer demand shifts ravaged demand forecasts, leaving most CPG companies reverting to manual intervention to fix their stock issues. While unavoidable in the beginning, this event highlights the shortcomings of many forecasting methodologies: a basic assumption that demand is steady and slowly changes. Consumption sensing takes a new approach by creating a "conversation with the consumer" to predict consumer demand and identify shifts for near, mid, and long term forecasting and planning.
There are two fundamental issues with most CPG’s and retail demand forecasts:
- The demand shifts that occurred in March were unpredictable, resulting in many companies discarding their forecasts and manually intervening to fix their supply issues.
- Consumer behaviors changed, and no one knows with certainty, which behaviors will stick, which ones will slowly change, or which ones will quickly revert to what they were before.
Many forecasts overly rely on history and the assumption of steady, slowly changing demand; hence, they cannot predict significant consumer shifts. Only through a “conversation with the consumer” can one anticipate these demand shifts and apply that knowledge to near, mid, and long-term forecasting and planning.
While not a literal conversation, consumption sensing provides a deeper understanding of consumer demand behaviors. Consumption sensing forecasts demand through the consumer lens instead of inferring it through historical shipments or orders. It leverages all available data, which may include: weather data, local events such as back to school or sporting events, store re-openings, promotional activities, price elasticities as well as the typical POS data
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