Thursday, November 10, 2011
Demand Planning Governing Organizational Strategy
As discussed in class, companies are adopting newer methods to forecast demand in order to manage their supply chain in an efficient manner. One such industry which is heavily affected by variability in demand is the consumer goods industry. As a result, a huge emphasis is laid on demand forecasting practices in the consumer goods industry.As discussed in class, consumer goods are heavily affected by seasonality and trends.
I came across this across this article , which talked about Procter & Gamble postponing the launch of a product so that the company cant meet the expected demand of the product. Such a strategic move has a rippled effect as it affects, the marketing and sales process, the manufacturing activities and also affects the distribution channels.The article mentions that, such a forecasting is based on past results that were observed by P&G during the launch of Gillete Fusion ProGlide and also a consumer test that was conducted by P&G to predict the future demand .
A move like this raises some questions about P&G's strategy, as why is P&G providing a window to its competitors by delaying the launch and why is P&G not investing in manufacturing so as to speed up the product launch.To come to think of it, only a giant like P&G,with such a strong hold in the market can afford to make such a move and dictate terms by pushing the launch of a product.
On the contrary, If P&G goes ahead and launches the product and is not able to meet the expected demand; then P&G will not be able to realize the benefits of the product launch and in turn speed up its manufacturing process in order to meet rising customer demand, which can lead to a chaotic situation.
This brings about an interesting picture of the way demand forecasting is affecting a company’s strategy. Some might say, that P&G has gone a step ahead where as some might call it meticulous demand planning.
Well, the question that still intrigues me is the accuracy of such forecasts that have the potential of shaping up the organizational strategy.
Here is the link to the article -