For companies that thrive on product innovation, forecasting demand for unreleased products months in advance can be a bit like shooting in the dark, but a disciplined sales and operations planning (S&OP) process can help by taking all the information involved — the current performance of competitors' products and market research studies that gauge demand, for example — and creating an educated prediction.
Chris Turner, vice president at StrataBridge, a UK-based S&OP consultancy, sees this kind of new product information as a gateway into the monthly S&OP schedule, part and parcel of a step he calls new activities planning.
"Anything that's new and, if you will, disruptive to standard supply and demand could potentially be in the new activities process," Turner says. "Companies driving a big innovation agenda really need to get a handle on this one."
And more companies are driving that type of agenda to grow the top line. MA's annual Outlook poll, detailed in this month's cover story, shows that as the rapacious drive toward cost cutting among manufacturers has subsided somewhat, the focus on new product introductions has intensified.
The best oracles of future demand are those who will plan a new product's promotional campaign — the sales and marketing team and brand managers assigned to it. Consequently, they play a prominent role in the new activities stage of S&OP. When they have gathered information on all the variables that attend the new product introduction, they feed that data into a forecasting engine that creates a demand outlook. That, in turn, tells the supply side of the business how much product to make.
Turner says manufacturers also should look at the flip side of the new product rollout process by examining products that are nearing the end of their lifecycles. Planning for the revenue gap that will appear when those product lines retire, he says, is part of any healthy S&OP process.
An existing lineup of products may be daunting enough for some manufacturers to plan for, but companies that are truly embracing sales and operations planning have broadened the scope to include new product rollouts.
"It's more interesting [to look at] what's going to hit rather than what's in the portfolio already," Turner concludes.