Why — and how — the Ag input value chain should track demand in the channel
John Brubaker
If you’re tired of the feast-and-famine cycle in the Ag input value chain, join the club. For years, manufacturers, distributors, and retailers have struggled to balance real-time demand with real-time supply.
There’s either:
(A) Too much product sitting in the warehouse — leading to ever-lower prices, a destocking conundrum, and less profitability for manufacturers, distributors, and retailers
or …
(B) Product shortages — and skyrocketing prices for the end consumer or a critical absence of timely inputs needed for the growing season
When the entire value chain is locked in a seemingly unpredictable, turbulent cycle like that, no one really wins.
So, what’s the solution?
More precision within the system.
And while there are a few steps to build smarter forecasting and a more precise supply-and-demand model, it all starts with demand tracking.
What is demand tracking?
Real-time demand tracking is nothing fancy — it’s monitoring sales projection trends within the channel.
The crucial piece of this is the real-time designation. Demand tracking should happen daily. Doing so on a monthly basis is better than nothing. But it’s also not good enough for today’s fast-moving supply chain.
Other industries have long since figured out their own versions of demand tracking. Apart from black-swan events — like the beginning of the Covid-19 pandemic sending toilet paper demand through the roof — grocery stores are mostly able to restock based on real-time demand. They monitor inventory data regularly to make sure customers can access the stock they need.
Clothing retail brands do the same. They track which of their designs are selling the most, then adjust their production to meet that demand. If certain items aren’t selling, they’re also able to adjust production downward.
But Ag has largely struggled to make some of these same adaptations. There’s still little channel visibility throughout the value chain. Data (sales, purchase, and inventory) remains fragmented. Chaos reigns when the system stays locked into the boom-and-bust cycle.
Why tracking demand is so important in the Ag value chain
That feast-or-famine cycle isn’t just chaotic and annoying, though. It’s hurting profits throughout the Ag input value chain. When manufacturers, distributors, or retailers hold onto unnecessary inventory for long periods of time, the bills rack up. In an era when interest rates are on the rise and every sliver of margin is critical, those costs can have a big impact.
And who can stand to take on more financial risk right now?
This cycle also reduces confidence in the forecasts that organizations make about supply. Without strong, data-backed decision-making throughout the value chain, a lot can go wrong:
Customers can’t access what they need because of shortages
Organizations’ capital is tied up in inventory storage
There are more missed sales opportunities because organizations didn’t see (in real-time) that they should have bumped production of a hot-selling item
Demand tracking helps limit these problems by improving visibility over how much product is where in the channel, as well as what’s selling (and what’s not). With this information on hand, organizations can start to better match their production decisions with actual market behavior.
How to track demand
To get started with demand tracking at your organization, here are a few tips:
Leverage historical trends: These days, you shouldn’t only rely on historical data. But you should still use it to automatically create a demand baseline for the current and next year. Then, flex those predictions based on new data and market trends.
Use real-time software: The days of being able to glean helpful information from data when it’s only updated monthly are over. The market moves faster — so your data collection and analysis should too. Whatever tracking system you use, make sure data is updated as often as possible, ideally daily.
Condense all data: Relying on disparate data sources only adds to confusion. But when you consolidate inventory, sales, and purchase data all into one platform, you can more easily identify trends, make quicker decisions, and improve visibility over what’s really happening in the market.
Increase partner visibility: Extending this view to your customer base, via a secure data exchange, will help everyone keep an eye on what’s in the channel (by sharing both sales and inventory data) in real time. The clearer that picture is, the better supply decisions you can make.
Once you have better demand tracking in place, your organization can start to build on that foundation. You’ll be able to more strategically plan demand, then optimize for more profit.
But none of that is possible without an upfront commitment to actually track how products are moving in the channel. Just like driving a car — there’s no planning ahead without good visibility.
Smartwyre’s platform gives you the tools you need to gain that visibility — and collect, organize, and analyze the data you need to adapt alongside real-time supply and demand.
Contact the Smartwyre team to learn more about how to leverage software to improve your demand tracking, get a better handle on Ag’s market fluctuations, and make better decisions for your organization.
