Why Guess When You Can Forecast?
The Consumer-Packaged Goods (CPG) industry has been facing challenging scenarios in the recent past. CPGs are struggling to keep up with trends including evolving consumer behaviors, purchasing patterns, and disruptions in global supply chains. However, leading CPGs have realized that they can no longer afford to ‘respond’ to consumer demand but need to forecast it. Hence, to stay ahead of the curve, CPG leaders are keen on investing in AI/ML forecasting solutions.
Companies that still choose to guess rather than use AI-powered forecasting tools are setting themselves up for a cascading effect of losses.
It begins with missing trends – which makes it difficult to understand product demand. This leads to failures in supply management viz. lack of materials, shortage of stock or excess of stock. This causes them to miss out on opportunities to sell. Eventually leading to missed business growth.
Miss out on key trends → Supply management instability → Miss out on sales → Miss out on growth
Research shows that the CPG industry is lacking behind in terms of AI & digital maturity (source).
Leveraging AI and technology to meet forecasting needs is the right step that CPGs need to take towards increasing their digital maturity. Demand forecasting is not merely a tool to make the job easier for a demand analyst but is an essential tool for CPG companies to boost their top-line growth.
Benefits Of Investing in an AI-Powered Demand Forecasting Solution:
Predict Shifts in Consumer Behaviors
One notable trend in the past five years was the shift from offline shopping to online shopping. According to a survey in 2021, 57% of consumers preferred online shopping over offline (source). CPG companies that invested in forecasting tools, received this insight in real-time. This led them to focus on their online channels, and thus boost sales.
A demand forecasting solution uses data on trends, customer sentiment, historical performance, competitors’ performance, and generates accurate forecast reports. Such reports help organizations stay on top of the ever-evolving consumers.
Avoid Supply Chain Disruptions
In 2021, most challenges faced in supply chain management were related to shortages of material, higher lead time and out-of-stock situations (source).
Stocking on inventory without clarity on demand often leads to wastage and unwanted expenses. Demand forecasting helps teams predict how much inventory is likely to be sold at various SKUs, considering historical data, trends, events, purchasing power and several other factors. It helps deliver the right products, in the right quantity, at the right time to consumers, without creating a surplus of inventory.
Create Accurate Budgets
Gone are the days when CPG companies planned budgets based on historical charts and intuitions. To optimize budget allocation, companies now rely on AI-powered demand forecasting solutions. For instance, forecast reports predicted the shift of consumers shopping from offline to online. This directed CPGs to allocate higher budgets to online activities.
Today, demand forecasting is the crux on which companies chart out their expected revenue, profit margins, operating costs, staffing costs and other spends. Thus, investing in the right demand forecasting tool can help organizations ensure business goals are met and boost top-line growth.
Catch Up on Digital Maturity
As mentioned earlier, the CPG industry is struggling to attain digital maturity. While its partner – the retail industry is increasingly leveraging AI for forecasting needs. A worldwide survey revealed that retailers plan to enhance the use of real-time digital technologies for better demand planning and forecasting. In 2020, 40% of retailers aimed at using automation as a real-time process for demand and supply forecasting (source).
Such tools help retailers understand which products are in demand / would be in demand. It is imperative that CPGs too catch up on digital maturity. Forecasting solutions will help CPGs access the same intel as retailers, which will help improve negotiations and thereby increase sales.
CPG companies that are ahead of the curve are those that invest in the right demand forecasting solutions based on their needs. The solution needs to be one that uses AI/ML to generate forecasts in real-time, builds scenarios and can be customized to suit their business environment best.
To know more about Co.dx, our state-of-the-art AI Application Suite for CPG, reach out to firstname.lastname@example.org