As they sift through sales histories, the programs' algorithmic engines are designed to recognize patterns and apply different formulas to the calculations based on the patterns detected. This includes making determinations of which patterns are statistically significant and which are not, Singh points out.
"When you're planning to use a system such as Zemeter, one of the major advantages is for you to let the software do the heavy lifting. Instead of reviewing and adjusting each item, people get the most benefit if they let the program handle the bulk of the forecasting, while users concentrate their time on dealing with exceptions."
One beauty of today's highly intelligent forecasting systems is that they incorporate built-in processes for continuous improvement, adds Karin Bursa, vice president, marketing for Logility Inc., Atlanta, which includes a comprehensive demand planning system within its Voyager supply chain suite.
"The systems actually get smarter over time, because as the data on real demand vs. forecast feeds back into the systems, the data they're working with and the way they apply various formulas keeps getting better, enabling management to keep making better, more informed decisions."
By the same token, notes Antonio Boccalandro of Dallas-based i2 Technologies Inc., the systems provide extensive audit capabilities, enabling users to document and annotate any changes made to the forecast, so these can be reviewed later and judged as to whether they were accurate or not, thus helping the human elements in the equation to continually improve their forecasting performance as well.
A large part of their value as a strategic tool lies in demand planning system's abilities to simulate scenarios and perform what-if projections, notes Taunton of CDC and others.
"The ability to model demand by distribution channel and product class, as well as by particular items, combined with capabilities to model seasonality and promotional activity, allows companies to become very proactive in how they can influence and shape demand in different markets," says Bursa.
"One thing that's interesting with these tools for scenario analysis, is that companies are starting to look at things more holistically, at the supply chain as a whole," Boccalandro of i2. "So from projecting an increase of 10 percent in sales, for example, a company can examine in a very detailed way just how such an increase would affection their production or logistics capability, and so identify potential challenges or bottlenecks before they occur. They might determine that certain vendors might not be able to supply necessary materials, or a packaging line might not have enough capacity. Then they can take steps to accommodate these potential shortfalls, before they occur."
"By using a good demand planning system, companies can greatly increase their forecast accuracy, but that's not the end point," adds Singh. "For every business, there's a triangle of considerations: increasing customer satisfaction, decreasing costs, increasing throughput. If you think about them, there is an inherent conflict among these three areas, and the trick is finding the most successful balance. A good demand planner helps companies achieve this balance, so they can improve customer service, increase asset utilization by up to two-three percent and reduce overall inventory, all at the same time, and not only that, but do it in a sustained way, month after month."