Introduction to Demand Sensing

Objective

After completing this lesson, you will be able to Highlight Demand Sensing Functionalities.

Introduction to Demand Sensing

Key Learning Points and Benefits for a Supply Chain Planner

Based on the different planning horizons, the following cases need to be considered:

  • Demand sensing creates a short-term demand plan. The reaction to this plan is not part of the SAP IBP solution but is highly dependent on your industry, production boundaries, business strategy, and overall possibility to react in the short-term, as follows:

    • Adjust deployment or transportation decisions.

    • Decide on stock transfers (redistribution) from one Distribution Center (DC) to another for the finished goods in case you see short term regional shifts in demand.

    • Change your production sequence (if possible) in case you see high demand for specific products.

  • In the wholesale/distribution business, material purchasing could also play a role when it comes to demand sensing, as follows:

    • Rework your purchases from external and internal suppliers to procure material easily.
Demand Sensing — Properties and Algorithms

Compared to classical statistical forecasting, Demand Sensing has the following properties:

  • The demand sensing algorithm is primarily used for demand forecasts for a shorter period such as four to eight weeks, based on the consensus demand and the most recent demand signals retrieved from the ERP system, for example, the quantity in open sales orders. Typically, demand sensing is executed for multiple products in the background and results in automatic adjustment of the short-term demand.

  • Two types of Demand Sensing algorithms exist:

    1. Demand Sensing (Full)
    2. Demand Sensing (Update)
  • Demand sensing is typically run daily. It is executed at product-location-customer level, and the sensed demand is created at the daily time granularity for the time horizon defined in the forecast model.

  • Since the optimization processes can take some time and the optimized weights do not change much from one day to the next within a week, it is recommended to set the system to run the demand sensing (full) algorithm weekly and the demand sensing (update) on a daily basis.

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