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Demand Sensing: Guarantee FMCG Supply Chain Success with Reliable Location Data

Explore how FMCGs can utilize demand sensing with reliable location data to transform supply chain management.

8 min read
- Published on
May 21, 2024

QUICK SUMMARY

Demand sensing is a method that uses advanced analytics powered by real-time location data to predict consumer demand accurately. It transforms the guesswork of FMCG supply chain management into a precise science by analyzing various data points such as Point of Sale (POS) foot traffic, demographics, consumption patterns, and competitive activity. This allows businesses to align their inventory levels closely with actual market needs. This reduces inefficiencies and allows for swift responses to market changes, enhancing overall supply chain resilience.

TABLE OF CONTENTS

Demand Sensing: Guarantee FMCG Supply Chain Success with Reliable Location Data

What is the hallmark of the Fast-Moving Consumer Goods (FMCG) industry? It's relentless pace and constant flux. 

Companies in this sector face a myriad of challenges, particularly in supply chain management. The primary goal is to keep the shelves stocked with the right products at the right time. However, this task is often complicated by unpredictable market conditions, leading to issues such as overstock, stockouts, and ultimately, dissatisfied customers.

To navigate these complexities, FMCG companies have traditionally relied on historical sales data and intuition to forecast demand. However, these methods often fall short of accurately predicting consumer behavior in real-time.

This is where demand sensing comes into play.

Demand sensing leverages advanced analytics to detect short-term consumer demand with high accuracy, enabling companies to make proactive, customer-centric decisions.

Why is it crucial?

Because it transforms the guesswork of supply chain management into a precise science. By analyzing various data points such as Point of Sale (POS) foot traffic, demographics, consumption patterns, and competitive activity, businesses can align their inventory levels closely with actual market needs. This not only reduces inefficiencies but also allows for swift responses to market changes, thereby enhancing overall supply chain resilience.

A critical component of effective demand sensing is the availability of clean, reliable, and accurate datasets. High-quality data is essential for generating precise forecasts and making informed decisions.

Accurate datasets provide insights into POS foot traffic, consumer preferences, and buying patterns, which are invaluable for optimizing inventory management, improving customer satisfaction, and reducing operational costs.

By leveraging these datasets, FMCG companies can better understand market dynamics, anticipate demand fluctuations, and enhance their overall supply chain efficiency.

As we expand your understanding of demand sensing, we will explore how clean, reliable data not only optimizes current supply chain operations but also prepares FMCG companies for future challenges and opportunities.

This foundation of accurate data sets the stage for effective supply chain forecasting, strategic merchandising, and agile supply chain management, ultimately leading to a more resilient and responsive business.

What Is Demand Sensing?

Definition of Demand Sensing

Demand sensing is a method that uses advanced analytics powered by real-time data to accurately predict consumer demand. Unlike traditional forecasting, which relies heavily on historical sales data, demand sensing focuses on current market dynamics to provide a more immediate and precise understanding of consumer needs. This approach is essential for creating a customer-centric supply chain, where the primary goal is to deliver high service levels with optimal stock levels, ensuring that products are available when and where customers want them.

The Role of Location Data in Demand Sensing

A critical element of demand sensing is the integration of clean & verified location data.

This data encompasses various aspects such as Point of Sale (POS) foot traffic, demographics, and consumption patterns.

By analyzing this information, businesses gain valuable insights into where their products are most needed, which POS locations attract the highest foot traffic, and how consumer behaviors change over time.

Geospatial analytics helps in understanding the catchment areas of different POS and the competitive landscape, enabling companies to make informed decisions about where to focus their sales efforts and promotional activities.

Demand Sensing And Supply Chain Management

Demand sensing significantly reduces the guesswork/potential risk traditionally associated with supply chain management.

Here’s how:

  1. Prospecting / POS Selection: Companies can identify the most lucrative locations to sell their products by analyzing foot traffic data and understanding the busy areas around each POS. This ensures that products are placed in high-demand areas, maximizing sales potential.
  2. Merchandise and Promotion Planning: Demand sensing provides insights into which stores are most effective for merchandising and promotions. By understanding where and when promotions are working, companies can optimize their strategies to boost sales and engagement. 
  3. Demand Prediction: Accurate demand prediction allows companies to determine how much product will be needed at specific retailers in the short term. This reduces the risk of overstocking or stockouts, leading to better inventory management.
  4. Supply Chain Forecasting: With precise data, companies can forecast supply chain needs more accurately, ensuring that suppliers deliver on time and reducing the likelihood of disruptions.

In essence, demand sensing focuses on minimizing supply chain lag by swiftly reducing the time between identifying demand signals and responding to them intelligently.

By using clean, reliable, and accurate datasets, FMCG companies can create a more agile, responsive, and customer-centric supply chain.

This capability not only optimizes current operations but also prepares businesses for future challenges and opportunities, paving the way for a more resilient and efficient supply chain.

Why Demand Sensing Is Crucial for Consumer Demand

In the fast-paced world of Fast-Moving Consumer Goods, accurately predicting and responding to consumer demand is essential for maintaining a competitive edge. Demand sensing, powered by precise geospatial data, offers several key benefits that can transform supply chain management and drive business success.

Eliminate Uncertainty and Missed Opportunities

Traditional supply chain management often involves significant guesswork, relying on historical data and assumptions about consumer behavior. 

Demand sensing eliminates uncertainty and missed opportunities by leveraging accurate geospatial insights. This data provides real-time insights into POS foot traffic, consumer preferences, and buying patterns, enabling businesses to make data-driven decisions. 

By understanding exactly where and when products are needed, companies can optimize inventory levels, reduce waste, and ensure that shelves are always stocked with the right products, shifting from guesswork to certainty.

Insights on POS Foot Traffic, Buyer Patterns, and Competition

One of the most significant advantages of demand sensing is the ability to leverage detailed insights into POS foot traffic, buyer patterns, and competition. These insights allow companies to fine-tune their marketing and promotional strategies, ensuring that efforts are targeted and effective. For instance, by understanding which POS locations have the highest foot traffic and what products consumers are most interested in, businesses can tailor their promotions to meet demand. Furthermore, analyzing competitive activity helps in identifying gaps in the market and opportunities for differentiation.

Optimize Business Expansion and Retail Presence

Expanding into new markets and optimizing retail presence are critical for growth in the FMCG sector. Demand sensing provides valuable insights that can guide these efforts. By analyzing geospatial data, companies can identify high-potential locations for new POS and determine the best areas for expansion. This ensures that resources are allocated effectively, and new stores are set up in regions with high demand. Additionally, understanding competitive presence and market dynamics helps businesses refine their strategies to gain a competitive advantage.

Prepare for and Counter Supply Chain Disruptions

Supply chain disruptions are inevitable, whether due to unforeseen market shifts, natural disasters, or other external factors. Demand sensing equips FMCG companies with the tools to anticipate and prepare for these disruptions. By analyzing real-time data, businesses can identify potential issues before they escalate, allowing for proactive measures to mitigate risks. This capability not only helps in maintaining continuity but also in quickly adapting to changing market conditions, thereby minimizing the impact on sales and customer satisfaction.

Demand sensing transforms the supply chain from a cost center to a revenue-generating function. By combining historical data with future predictions of external factors, it enables predictive demand, giving businesses a competitive edge. This shift allows supply chain planners to move from manual activities to strategic, data-driven scenario planning. For consumers, it means products are in stock at the right time and place, reducing the risk of stockouts and improving brand loyalty.

The adoption of demand sensing as part of a broader digital transformation strategy brings a range of financial benefits, including higher revenues, improved profit margins, decreased inventory levels, better order performance, and a shorter cash-to-cash cycle time. It also prepares the ground for a truly connected end-to-end supply chain, enabling new data-driven business operations and increased consumer interaction.

Demand Sensing Challenges

What’s the biggest challenge in Demand Sensing? Dealing with weak datasets.

Issues such as corrupted data, independent events, small sample sizes, and historical drivers that don’t relate to future demand can significantly hinder the accuracy of demand predictions.

Clean, accurate, and reliable data is crucial for effective demand sensing. 

That’s where Echo Analytics steps in.

Using Echo Datasets

Echo Analytics specializes in transforming raw, unprocessed data into actionable insights. At Echo, we do the heavy lifting, so you don’t have to.

We aggregate terabytes of up-to-date data into light and powerful data files, ensuring that you have meticulously clean, verified, and updated location intelligence data at your disposal.

Benefits of Unified Foot Traffic Data From All POS Globally

Echo Activity Data provides unified foot traffic counts from all Points of Sale (POS) globally. This comprehensive data offers unparalleled visibility into consumer behavior, allowing FMCG companies to accurately predict demand and optimize their supply chains. 

By analyzing foot traffic, demographics, consumption patterns, and competition, businesses can make proactive, customer-centric decisions that enhance their operational efficiency and drive growth.

Echo Support of FMCG's for Long-Tail POS

Echo’s mobility data, known as Activity, is a powerful tool for understanding consumer demand with precise geospatial data. By leveraging Activity data, FMCG companies can analyze POS foot traffic, demographics, consumption patterns, and competition. This enables them to make informed decisions about where to focus their sales efforts and promotional activities. Echo’s data-driven approach helps businesses understand their long-tail POS better, ensuring that resources are allocated effectively and that inventory levels are optimized.

Unlocking More Benefits for FMCGs With Echo

1. Site Selection: Echo helps analyze demographic purchasing behaviors to align with supply plans, balancing new locations with existing ones. Powered by Places, Activity, and GeoPersona.

2. Footfall Attribution: By analyzing foot traffic and demographic insights, Echo helps identify the most profitable locations, understand local market dynamics, and plan inventory distribution effectively. Powered by Activity, and GeoPersona.

3. Market Intelligence: Echo provides insights into consumer behaviors and preferences across different regions, helping identify new market opportunities and assess competitive landscapes for strategic expansion. Powered by Places, Activity, and GeoPersona

Simply put, Echo Analytics is your trusted partner in demand sensing, providing the clean, reliable, and accurate datasets essential for conquering supply chain chaos in the FMCG industry.

By integrating Echo’s comprehensive data solutions, proactive businesses are creating a more agile, responsive, and customer-centric supply chain process, paving the way for sustained growth and success.

Use Case: Transforming Demand Planning for an Energy Drinks Company

To experience the power of Echo's data-driven approach, let's consider a real-world example of one of our clients, a well-known energy drinks company, that utilized Echo’s mobility trends to enhance its predictive demand planning algorithm.

Situation: This energy drink manufacturer struggled to keep products on the shelf in some stores while overstocking in others.

Task: Echo Analytics was asked to monitor store locations where the energy drink was sold.

Action: Echo built a comprehensive database of every POS where the product was sold and provided monthly visitation analytics. These analytics were matched with POS information gathered by the client to inform future demand at each POS.

Results: By the end of the year, the client saved 11% on re-shipping costs compared to the previous year and sold 20% more units.

This demonstrates how Echo’s data-driven approach can transform demand planning and significantly impact a business's bottom line.

Looking for a Data Partner?

Demand sensing powered by reliable location data is the secret game-changer for the FMCG industry.

It eliminates the guesswork in supply chain management, prepares businesses for disruptions, optimizes expansion efforts, and leverages critical insights to enhance overall performance.

Echo stands as a crucial partner in this journey, providing meticulously clean, accurate, and actionable data. 

Reach out today and discover how our comprehensive data solutions can help you conquer supply chain chaos and achieve unparalleled success.

Author
Shibanti Banerjee
Content Manager
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