What is Demand Sensing

What is Demand Sensing and how are Retailers using it to optimize their Inventory

Demand sensing is a technique used in inventory management to quickly identify changes in customer demand for a product. It involves using real-time data, such as point-of-sale data and customer reviews, to continuously monitor demand and adjust forecasts at a high frequency. Demand sensing can help businesses respond quickly to changes in the market and avoid lost sales due to stockouts. It is a more short-term approach than demand forecasting, which involves making long-term predictions about future demand. Demand sensing is often used in fast-moving or highly dynamic markets, where demand can change quickly and unexpectedly.

What data is used in Demand Sensing?

In demand sensing, real-time data is typically used to continuously monitor customer demand for a product and adjust inventory levels accordingly. Some examples of the data that may be used in demand sensing include:

  • Point-of-sale data, which can provide information about the quantity of a product that is being sold at a given time
  • Customer feedback, such as reviews or ratings, which can provide insight into the popularity of a product and changes in customer preferences
  • Market data, such as pricing data from competitors, which can provide information about trends and changes in the market
  • Shipping and logistics data, which can provide information about the movement of inventory and the demand for a product at different locations
  • Weather data, which can be useful for businesses that sell products that are sensitive to changes in the weather, such as clothing or outdoor equipment.

What is the difference between Demand Sensing and Demand Forecasting?

Demand sensing and demand forecasting are two different approaches to predicting consumer demand for a product or service. Demand forecasting is a traditional method that involves using historical data to make predictions about future demand. This approach can be useful for long-term planning, but it may not be able to accurately predict sudden changes in consumer behavior.

On the other hand, demand sensing is a more advanced approach that uses real-time data and predictive analytics to forecast demand. This allows businesses to respond quickly to changes in the market and make more accurate predictions about consumer behavior. Demand sensing is more dynamic and flexible than demand forecasting, and it can help businesses to be more agile and adaptable in their operations. While demand forecasting is typically used for long-term planning, demand sensing is often used for short-term decision making.

The two technologies are often applied together, with Demand Sensing handling the short-term forecasts and Demand Forecasting handling the long-term forecasting.

What are the benefits of using Demand Sensing?

There are several advantages to using demand sensing in inventory management. Some of the key benefits include:

  • Improved customer service: By continuously monitoring demand, businesses can avoid stockouts and ensure that they have enough inventory on hand to meet customer demand. This can help improve customer satisfaction and reduce the risk of lost sales.
  • Increased efficiency: By using real-time data to adjust inventory levels, businesses can avoid holding excess inventory, which can tie up capital and take up physical space. This can help businesses save money and improve their overall efficiency.
  • Better decision making: Demand sensing provides businesses with a more detailed and accurate picture of customer demand, which can help them make better decisions about their inventory levels. This can help businesses avoid overstocking, which can lead to financial losses, and ensure that they have the right products on hand to meet customer demand.
  • Faster response to market changes: Because demand sensing uses real-time data, it can help businesses quickly identify changes in the market and respond accordingly. This can be particularly useful for businesses operating in fast-moving or highly dynamic markets, where demand can change quickly and unexpectedly.

Stay tuned on the Remi AI blog as we build out the complete supply chain offering!

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Who are we?

Remi AI is an Artificial Intelligence Research Firm with offices in Sydney and San Francisco. We have delivered inventory and supply chain projects across FMCG, automotive, industrial and corporate supply and more.
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