How to successfully forecast demand for new products – 12 things your system should do

This post looks at the system support your planners need to accurately forecast demand during the early stages of the new product’s lifecycle.

The forecasting challenge

Projecting demand for a new product can be challenging. Without sales history and demand signals, your projections rely heavily on market research and testing. A collaborative and highly dynamic planning effort is required to capture as much supporting information as possible.

Introducing new versions that aim to replace or complement existing products poses a different set of challenges. While these scenarios offer more data to work with, they need to be carefully planned to avoid under and overstocking and unnecessary discounting. Additionally, planners must be able to address product supersessions and cannibalization dynamics effectively.

Regardless of the introduction specifics, your demand planners need the right tools to deliver reliable projections.

New product forecasting – a system requirements checklist

Robust demand planning software is required to effectively plan new product introductions (NPIs). This checklist outlines the main capabilities to look out for in a system:

1. NPI forecasting algorithms:

Your demand planning system should offer algorithms designed specifically for new product introductions. The solution must be capable of handling limited historical data, or even no historical data, by leveraging other relevant information such as market research, customer insights, and comparable products.

2. Machine learning:

NPI planning is an area where Machine Learning (ML) technology can offer significant benefits. An ML-powered forecasting system can learn from past introductions and better estimate the impact of promotions, events, and important external factors.

3. Supersession management:

Another essential feature is the ability to link a new version of your product to a predecessor. This allows you to manage product phase-ins and phase-outs much more effectively.

4. Promotion planning:

Marketing events and promotions are frequently used to boost new products. Look for a system that can extract intelligence from past campaigns and apply this knowledge to new product introductions.

5. Forecast adjustments:

New product forecasting is inherently dynamic, and your demand projections will require frequent updates to reflect new information. Therefore, it must be easy to make forecast adjustments. When you make a change at any level in the product hierarchy, it should automatically carry through to all other levels, thus ensuring data integrity.

6. Scenario planning:

This capability allows you to simulate different demand scenarios by adjusting parameters such as pricing, marketing campaigns, or market penetration levels. By analyzing and comparing the outcomes, you can make better-informed decisions about your product launch strategy.

7. Stakeholder collaboration:

New product forecasting is a collaborative effort. Your demand planning system should facilitate collaboration between everyone involved in the introduction process. Ease of use is critical here. The solution must allow cross-functional teams, including sales, marketing, product development, and supply chain, to share information, inputs, and assumptions. Equally important is the ability to collaborate with your customers and suppliers to gain a clearer view of supply capacity and expected uptake.

8. Product modelling:

Your system must be able to model your product dimensions and attributes. Rigid software can quickly become a barrier, restricting your ability to analyze and manage your business. This is especially important if you have an extensive product portfolio.

9. Supply planning Integration:

A direct link between your demand planning and supply chain planning solutions enables seamless collaboration with your operations teams. This facilitates scenario planning and is extremely valuable to your operations teams as they prepare to support the product launch. Demand planners also benefit from a better understanding of the supply situation.

10. Automated workflows:

Workflow capabilities ensure your NPI planning process stays on track. A clear audit trail means adjustments, including explanations and approvals, are always logged.

11. Analytics and reporting:

Demand planning is an iterative process. You can improve your forecast accuracy by comparing your projections with actual sales data as it becomes available. Therefore, strong analytical and reporting capabilities are needed.

12. Lifecycle management:

While this post focuses on new product forecasting, your system must support demand planning throughout the product lifecycle – from initial launch to growth, maturity, and eventual decline and phase-out. The tool should allow for demand adjustments and recalibration as the product lifecycle progresses, helping you manage inventory, production capacity, and supply chain requirements for the new product more effectively.

Set yourself up for a successful introduction

A good NPI forecast allows you to optimize inventory levels, minimize costs, and capture the new product’s full commercial potential.

To succeed, you need a demand planning solution that lets you adopt an agile, data-driven, and collaborative approach to NPI planning. So, when doing your research, keep this checklist handy to ensure you’re not missing out on key capabilities.

If you want to learn more about Optimity’s demand planning solution and how we can help your business, let’s talk.