Demand Sensing in the Walmart Supply Chain

In this article, learn about: 

• What is demand sensing? 

• Methods to sense demand 

• The difference between demand sensing and demand forecasting

• How does Walmart do demand forecasting?

Present-day supply chains face significant challenges, including expanding product lines, shorter product lifecycles, increasing complexities, and vast quantities of data. Adding to these difficulties, suppliers must cater to demanding and unpredictable customers. Trends fueled by the internet are becoming more volatile, while factors such as weather, new product launches, and economic shifts heavily influence promotions and sales.

To prepare for tomorrow’s challenges, brands need a clear understanding of how supply chain fluctuations impact demand. This insight ensures they meet customer needs at the right time. With better knowledge of customers’ wants and needs, supply chain managers can make informed decisions, optimize inventory, and ultimately drive profitability.

What is Demand Sensing?

Demand sensing is the process of using real-time data and advanced analytics to detect and respond to short-term changes in customer demand. Brands cannot precisely predict demand because there are an unlimited number of variables in play. 

Demand sensing integrates short-term trends with long-term planning. Rather than being forced to use one forecast for a 60- or 90-day horizon, planners can update their forecasts with the most recent sales history. With this advantage, supply chain managers can immediately respond to changing demands for more profits, better quality service, and less waste.

Why is Demand Sensing Important?

If suppliers overestimate actual demand, then they may end up with too much inventory. An inaccurate forecast can cause excess inventory, which in turn causes a spike in labor and storage costs. On the other hand, if suppliers underestimate demand, they run the risk of failing to fulfill customers’ needs. 

The Difference Between Demand Sensing and Demand Forecasting

Demand sensing and traditional demand forecasting are two key strategies in supply chain management, but they serve different purposes. Demand forecasting focuses on predicting future customer needs over a longer period using historical data and market trends. It helps businesses plan production and manage inventory efficiently.

On the other hand, demand sensing is all about responding to short-term changes. It uses real-time data to identify what customers want and when they want it, then compares that demand to the current supply. This allows businesses to adapt quickly and reduce waste.

Methods to Demand Sensing

There are numerous approaches to detecting demand, all of which help businesses improve their response time and profits. Of these, the most effective strategies fit into three key areas:

Short-Term Predictions Using Sell-In Data 

Businesses can start sensing demand by analyzing detailed historical data, like daily sell-in or ship-to data. By focusing on short timeframes, they can adjust forecasts more precisely. Many supply chain and ERP systems already offer tools for short-term forecasting, making this data easy to access and use.

Incorporating Sell-Out Data 

To improve forecasts further, businesses should include downstream sell-out data, such as customer purchases, point-of-sale transactions, or channel-specific trends. This data helps identify demand patterns, spot potential issues early, and bridge the gap between the plan and the actual scenario within the supply chain.

Using Demand Drivers and External Data

Effective demand sensing also incorporates external factors, such as stock market changes, competitor promotions, viral social media trends, new product launches, and even weather conditions. By combining sell-in data, sell-out data, and these external variables, businesses can create forecasts that are both accurate and flexible, helping them respond to any situation.

When these three data sources are combined, planners gain a comprehensive view of demand, enabling them to make better decisions and improve customer satisfaction.

Demand Sensing in the Walmart Supply Chain

Walmart has become the market leader because of its efficient combination of suppliers, manufacturers, warehouses, and DCs. Walmart makes optimum use of technology in its supply chain. 

Take, for instance, its application of the first across-the-organization Universal Product Codes (UPC), which instantly collates and analyzes store-level data. Using this data, Walmart store managers know which items are performing well. Thus, the store manager can send orders to the supplier. 

How Does Walmart Do Demand Forecasting?

Walmart supports its suppliers in planning and forecasting by providing advanced platforms like Supplier One and Scintilla (formerly known as Luminate). These platforms offer real-time data to enhance supply chain efficiency and response to customer demand. They allow suppliers to predict demand, plan inventory levels, and make 

A key feature in Supplier One’s Demand Forecast section is the Daily Demand and Inventory Record (DDIR). This feature provides near real-time visibility into inventory, inbound shipments, and outbound activity for perishable goods at Walmart’s Grocery Distribution Centers. It is only available for departments like Dairy, Meat, Produce, and Bakery. 

Related Reading: Walmart Departments, Categories, and Finelines Cheat Sheet

The DDIR enables suppliers to react quickly to changes in demand, reduce waste at distribution centers, and fine-tune forecasts to maintain in-stock levels and boost sales.

Supplier One also offers the Store Demand Forecast feature, which provides week-by-week projections of business performance over the next two years. This long-term forecast helps suppliers better understand demand trends, align their production and inventory plans with Walmart’s expectations, and improve supply chain coordination.

Scintilla allows suppliers to track key inventory metrics like on-hand quantities, out-of-stocks, and forecasted quantities. Suppliers can identify risks, stay ahead of issues, and make sure that they meet the needs of customers sufficiently.

Related Reading: How Do I View My Walmart Instocks?

By incorporating these tools, Walmart allows suppliers to utilize both short-run and long-run forecasting techniques. This enables the suppliers to ensure accurate inventory levels, reduce costs, and drive customer satisfaction.

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