Supplying retailers in emergent markets is rather a challenging and an appealing topic for both academics and professionals. Highly efficient Supply Chains are essential for Fast Moving Consumer Goods (FMCG) companies in such markets where distribution networks are very dense and traditional trading has an important presence. Products need to be on the shelf and available to the shopper, wherever, whenever, however, but using an optimum amount of stock just enough to avoid shortages and not to block too much cash by inventory. This is particularly true for perishable products that have short shelf life without any salvage value and can hurt the profitability of the retailers significantly.
Retailers tend to place low value orders with small volume but high frequently. Fast Moving Goods (FMGs) Companies must organize their distribution to serve several sales points in each territory. Both FMCG companies and retailers face then tough challenges from demand forecasting to assortment planning. Demand forecasting is not only critical to driving out inefficiencies in the supply chain, it affects all facets of the company. Sales forecasting forms the basis of all supply chain activities. Moving products from the suppliers’ raw material to the consumer hands, takes times. Companies cannot simply wait for demand to occur. They must sense demand signals and shape demand in anticipation of future customer behavior so they can react immediate to meet customer orders.
Supply chain planning systems start from demand forecasting which serves as the basis of every planning activity. Forecasting provides vital inputs to almost all of the other functions such as marketing, operations, sourcing, sales, merchandising, budgeting and controlling.
In practice, most forecasting approaches are supply driven with little emphasis on predicting the real demand. Current practices are based on rules of thumb that need to be modeled to consider internal and external factors that may affect the demand. A major challenge experienced by many companies is how to engage all forecast providers and analysts into a consensus process and have them take ownership of the forecasts.
This is crucial when demands for products changes rapidly from one period to another due to predictable and unpredictable influences. These influences include seasonal factors that affect products sales volumes, as well as non-seasonal factors (e.g. Promotional) that may cause large, predictable increases and decline in sales.
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