The construction industry today is more volatile than ever. With business conditions becoming increasingly unpredictable, supply chain planners in the cement industry have their work cut out—they need to align supply and demand if they are to stand any chance of retaining and growing market share. To add to the complexity, this needs to be done on an ongoing, near-term basis, as long-term plans seldom work in the face of such frequent market fluctuations.
As businesses look to maximize revenue and market share year over year, the only strategy that can help them achieve this on a sustained basis is effective demand planning. However, this is easier said than done. Demand planning challenges are infamously daunting. Common questions fully capable of keeping the best of planners up at night include:
- What can be done if demand patterns change between planning and production?
- How can product mix be altered on the fly, on the shop floor if this happens?
- What are the optimal inventory levels for raw materials to avoid over or understocking?
- How can demand be predicted precisely to avoid stockouts or excess supply?
- What is the exact cost of misaligned demand and supply?
- How can the impact of external variables such as supply shortages and disruptions be factored into demand forecasts?
- How can the value chain generate continuously despite revenue gaps or weather changes?
The secret to effective demand planning lies in predicting and meeting real-time fluctuations in demand—as well as influencing it—to achieve long-term business goals while ensuring operational agility and resilience to potential market adversities.
To accomplish this, here are the top three strategies demand planners and supply planners should consider.
1. ACCOUNT FOR EXTERNAL VARIABLES AS WELL AS INTERNAL VARIABLES
Demand is influenced by a variety of factors, many of which are external to businesses. Examples include weather changes, natural disasters, changes in trends, and shifts in preferences and requirements. Unless external influencers are considered in their entirety, demand forecasts will never be accurate, and unless demand forecasts are accurate, no amount of demand planning will ever be effective.
Thus, external factors are as important as internal factors when trying to efficiently align supply to meet anticipated demand. In addition to the fact that external data analysis helps provide a holistic view of demand, it also provides critical insights to support business decisions such as product launches, new market entry, and risk mitigation. It also allows businesses to respond better to potential upheavals such as temporary supply shortages in supply or a sudden change in regulatory policies.
2. LEVERAGE ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING TO ANALYZE DATA AND PLAN AT SCALE
Artificial intelligence (AI) and Machine learning (ML) have greatly simplified demand planning for the challenging, evolving times of today’s cement industry. Considering the sheer magnitude of data that needs to be analyzed to facilitate accurate demand projections, it is beyond obvious that this is by no means a manual task.
Without the power of AI, demand planners spend a majority of their time firefighting disruptions that they had no way of getting ahead of in time. AI makes it possible not only to automate data analysis at scale, but also to predict changes ahead of time—making it possible to prepare for them in advance. Thus, production can continue uninterrupted, regardless of potential disruptions and run-time variations.
In other words, AI enables demand planners to shift their focus from reacting to changes to strategic planning despite these changes, empowering them to act ahead of time and acquire an edge in the market.
3. FOCUS ON CUSTOMER PSYCHE AND CASCADE LEARNINGS ACROSS TEAMS AND PARTNERS
The more you know about customer needs and preferences, the better you can plan your incoming and outgoing inventory while reducing carrying costs both ways. When you know what products your customers will need, how much they will need, and when they will need them, the less time your inventory will spend sitting idle on your shelves.
In turn, when inventory keeps moving at both ends of the value chain, you can adjust for future disruptions and prevent gaps in cash flow. All customer learnings should be trickled down cross-functionally to all relevant teams, from sourcing to production and distribution to ensure smooth, efficient operations from end to end.
Even suppliers can be brought on board. When you know the demand you are working toward, you can negotiate better terms with suppliers while at the same time ensuring continued supply. In fact, collaborating with key suppliers is a surefire way to have an immediate positive impact on your bottom line.
IT’S TIME FOR NEXT-GENERATION DEMAND PLANNING
Demand planning is a crucial process that affords cement manufacturers the ability to pivot their strategic and operational plans to adapt to rapidly changing market conditions. It is at the heart of a whole gamut of other critical business functions ranging from budgeting and financial planning, capacity planning, procurement, sales and operations planning, and risk assessment and mitigation.
Demand planning helps stabilize operations and ensure continued production, while at the same time optimizing resource utilization—which could eventually lead us toward a much more sustainable future.
Anita Raj is the VP of Product Marketing for ThroughPut Inc., an AI-Powered Supply Chain Software Company based in the U.S. & Germany.
