The main objective of this scientific paper is to define the complete Demand Management process along the supply chain. It is to be shown with which concepts the consumer goods industry can overcome the challenges. Success criteria should show how companies can measure their Demand Management performance and how they can get an edge over their competitors if they successfully implement a sustainable Demand Management process.
The scientific paper thesis contains four chapters. At the beginning of chapter two, key terms and the relation between demand and supply is explained. Based on a fictive Supply Chain the different types of demands and capacities are defined and concepts are given on how to handle them. Then the important role and calculation methods of the forecast are presented. The chapter ends with forecast accuracy measures.
In the third chapter, the theoretical approaches of the second chapter will be applied to the FMCG sector. After defining FMCG and its demand characteristics, concepts of Demand Management like Sales and Operation Planning or Efficient Customer Response are explained. At the end of this chapter, success criteria will be defined before showing how FMCG trends are affecting Demand Management.
In the last chapter, the key findings of this paper are summarized. The paper ends with a conclusion and an outlook, where further significant research needs are addressed.
High customer expectations, growing competitive pressure and shortage of resources throughout the supply chain describe the environment of the FMCG industry. Companies are forced to permanently increase their efficiency and effectiveness in all functional areas to stay competitive.
The increasing complexity of supply chains makes it very difficult to forecast customer demand. In today’s markets, it is nearly impossible to anticipate market volatility and to quickly react to it if companies don’t implement modern methods or tools of Demand Management. Inaccurate estimation of demand can result in overproduction or in too long lead times that might cause a loss of business. Both scenarios can have a major negative impact on companies’ success.
Table of Contents
1 Current challenges of the FMCG market
2 Definition and approaches of successful Demand Management
2.1 Concepts of Demand Management
2.2 Forecasting of demand
2.3 Determination of the forecast accuracy
3 Demand Management in the FMCG sector
3.1 Demand characteristics of FMCG
3.2 Concepts of Demand Management in the FMCG sector
3.3 Sales and Operations Planning (S&OP)
3.4 Efficient Consumer-Response (ECR)
3.5 Success criteria of Demand Management in the FMCG sector
3.6 FMCG trends with impact on Demand Management
4 Summary, Conclusion and Outlook
Objectives and Topics
The primary objective of this scientific paper is to define the complete Demand Management process within the supply chain, specifically tailored to the fast-moving consumer goods (FMCG) industry. It explores how companies can overcome market volatility, improve forecasting accuracy, and implement effective demand-driven strategies to gain a competitive edge.
- The theoretical foundations of supply, demand, and forecasting methodologies.
- Specific demand characteristics unique to the FMCG sector and their impact on operational planning.
- Strategic concepts such as Sales and Operations Planning (S&OP) and Efficient Consumer-Response (ECR).
- Methods for measuring demand management performance, including MAPE and WMAPE.
- Emerging trends in the FMCG market, such as e-commerce, digitalization, and sustainability.
Excerpt from the Book
2.2 Forecasting of demand
A Forecast is the estimation of future demands. Historical values and the market expertise of the sales department should be taken into account, when creating quantitative forecasts. The main aim of forecasting is to generate planning data to identify possible demand fluctuations at an early stage to be able to quickly react to them.
Regardless of which quantitative method is used to create a forecast, it is necessary to define the general conditions. First, the granularity and unit need to be defined. For example on item level or product family level. Second, the interval needs to be determined. That means how often the forecast gets updated. Third, the horizon needs to be set. How many past intervals are taking into consideration to calculate a statistical forecast and how many future intervals should be forecasted.
There are many approaches to create a forecast. In this paper, the focus will be on building a statistical forecast based on historical data, combined with manual adjustments of the sales department. The forecast is done monthly on item level. The unit is pieces.
At the beginning of every statistical forecast calculation, it needs to be checked, which materials are mathematically forecastable. A statistical forecast is only useful if the sales volume had no strong infrequent fluctuation in the past. The calculated values are only meaningful if no sudden changes in sales volume are expected in the future. In the following three basic methods to calculate a statistical forecast are explained:
Summary of Chapters
1 Current challenges of the FMCG market: This chapter introduces the competitive environment of the FMCG industry, highlighting the need for efficient demand management to counter supply chain volatility and inaccurate forecasting.
2 Definition and approaches of successful Demand Management: This section establishes fundamental economic definitions of supply and demand and details core forecasting methodologies including the average method, moving average, and exponential smoothing.
3 Demand Management in the FMCG sector: This chapter applies theoretical concepts to the FMCG market, discussing industry-specific characteristics, organizational processes like S&OP and ECR, and key performance indicators for measuring success.
4 Summary, Conclusion and Outlook: The final chapter synthesizes the main findings, emphasizing that collaborative supply chain strategies are vital for competitiveness, and suggests directions for future research into digitalization and e-commerce.
Keywords
Demand Management, FMCG, Supply Chain, Forecasting, Sales and Operations Planning, S&OP, Efficient Consumer-Response, ECR, MAPE, WMAPE, Market Volatility, PUSH-strategy, PULL-strategy, Vendor Managed Inventory, Digitalization
Frequently Asked Questions
What is the primary focus of this scientific paper?
The paper focuses on defining the Demand Management process along the supply chain and identifying concepts that enable the consumer goods industry to overcome modern market challenges and maintain competitiveness.
Which industry is at the center of this research?
The research is specifically centered on the Fast-Moving Consumer Goods (FMCG) sector, characterized by high turnover, low profit margins, and specific product demand patterns.
What is the central research goal?
The goal is to demonstrate how companies can achieve sustainable Demand Management through effective forecasting and collaborative strategies, ultimately measuring performance through specific success criteria.
Which scientific methods are applied in the paper?
The paper utilizes a combination of theoretical economic analysis and practical quantitative methods, such as the Mean Absolute Percentage Error (MAPE) and Weighted Mean Absolute Percentage Error (WMAPE), to evaluate forecast accuracy.
What topics are covered in the main section of the paper?
The main section covers demand characteristics, statistical forecasting techniques, organizational processes like S&OP and ECR, and the impact of current trends like e-commerce and sustainability on the supply chain.
Which keywords best characterize this work?
Key terms include Demand Management, FMCG, Supply Chain, Forecasting, S&OP, ECR, and Market Volatility.
How does the author define the relationship between supply and demand?
The author defines the market as the meeting point of supply and demand, where the objective is to reach an equilibrium point to maximize profits and minimize costs.
Why is the WMAPE calculation considered an improvement over the standard MAPE?
While MAPE is useful for comparison, it does not account for the impact of different materials. WMAPE addresses this by weighting the error based on the turnover share of each product, identifying deviations with the biggest financial impact.
How does the rise of e-commerce influence FMCG supply chains?
E-commerce adds a new service function by necessitating home delivery, which is particularly challenging due to the need for rapid commissioning and the perishability of FMCG products.
- Arbeit zitieren
- Anonym (Autor:in), 2020, Demand Management in the FMCG sector. Concepts, success criteria and trends, München, GRIN Verlag, https://www.grin.com/document/1010326
