Forecasting demand for a new product is much more difficult than existing products because there is no historical data to be taken as a reference, and acceptance of new products by customers is unknown. There are many potential risks that may influence the launch schedule and even change key decisions about the product leading up to launch. As demand planners, we need to pay much more attention to planning for a new products than existing ones.
What Things Do Demand Planners Need To Consider When Planning For New Products?
The new products we are talking about here refer to those products initiated by the supplier, not by the customer. This is an important distinction because if the new item request is driven by the customer, the demand is more clear and it will be easier to forecast. With this distinction in minds, let’s look at some crucial things to consider:
1 – Get The Findings From Trials
It is important that planners know trial cases as early as possible. Normally demand from new product trials is ignored by sales teams because of the limited volume. Typically, the demand planning team and supply chain is not aware of the trial request until the trial orders are released. However, a trial delivery always happens before the volume delivery meaning that we have this information before launch and we can use it to our advantage. The forecast based on trial data is a very good indication for the product’s potential. Therefore early notification of the product trial from Sales and feedback from the trial is important to planners so they know ahead of time that they’ll have this information, and use it to create forecasts.
2 – Transparent Communication With Other Functions
Transparent communication between the product, sales, demand planning and supply chain teams is another important factor when forecasting a new product. Quite often when there is a new opportunity for a new product, the sales team will work with the product team to identify the best product solution for the customer. If demand planning and supply chain are not involved in the discussion early enough, the customer may not get the delivery on time. Transparent communication with all stakeholders is crucial to smooth delivery, especially for new products.
3 – Manage Inventory For The Ramp Down Product
The excess risk of the pair product (the product to be replaced totally by the new one) is another important factor to be considered. The ramp up schedule can be delayed just because of high excess stock of the pair product. It is very important to monitor closely both the ramp up product and the ramp down product. In order to avoid high excess of the ramp down product, transparent communication regarding the product roadmap between the product team and the demand planning team is needed as early as possible.
4 – Regularly Review The New Product’s Business Cases
Regular review of the business case with the sales team is also an important factor when we forecast demand for a new product. We all know that before deciding to launch a new product or not, an extensive analysis will be carried out and a business case will be made to support the final decision by management. However, with a dynamic market environment, the business case may keep changing which requires us to review the business case before each important milestone decision. It may be that opportunities identified at the outset now no longer exist.
5 – Did I Say Transparent Communication Already?
As mentioned already, transparency regarding the product roadmap between the product team and demand planning team is more crucial than ever – and this is especially true with shorter lifecycle products. There is no doubt that shorter product lifecycles make new product planning more difficult because the window for reacting to real demand post-launch is very narrow, meaning that collaboration is key.
Considering so many uncertainties with ramping up a new product, it very difficult to plan for them. But it is possible to provide a good indication of demand for a new product if planners have early knowledge of trial requests and end customers feedback, transparent communication with all stakeholders (especially with the product team,) understanding the product roadmap early, control excess stock of its pair product, and review the business case before each important product milestone.
New product forecasting is a key topic that will be presented at IBF’s Predictive Business Analytics, Forecasting & Planning Conference in New Orleans. Held from May 6-8, 2019, it features a range of analytics, forecasting, S&OP, demand planning and data science leaders who will provide practical insight on predictive analytics, machine learning, new product forecasting and more.