Terra Technology, which makes inventory optimization solutions, is enabling consumer packaged goods manufacturers to incorporate demand signals from throughout their supply chains into their forecasting efforts.
Terra Technology on March 25 announced the release of its MDS (Multi-Enterprise Demand Sensing) product, which accepts streams of daily data from supply chain points, including POS (point-of-sale), channel inventory and retailer forecasts. MDS runs on an Oracle database with a Windows GUI.
"A lot of CPG manufacturers are collecting POS data from retailers, but aren't really using it to drive the supply chain," said Robert Byrne, president and CEO of Terra Technology. "It's not connected to other systems that make decisions about what to manufacture and ship."
According to Byrne, MDS can reconcile demand signals from the POS and other points on the supply chain to create a more accurate forecast.
"It provides a structured way to leverage channel information to predict the future," Byrne said. "MDS can analyze volumes of POS data that there is no way to do by hand."
Byrne said MDS is a "touchless" application, meaning, "MDS brings in information and users don't have to set parameters, set the mathematics or tweak the model," he said. "It's an automated way to mine demand data and use it for forecasting."
By applying proprietary mathematical algorithms to the demand data it collects, Byrne said MDS can reduce forecasting errors by as much as 50 percent in the short term and 20 percent overall.
"We're really a math company," he said. "Our goal is to get manufacturers to understand their orders so they can provide better service to retailers more efficiently."
Tom Harden, an analyst with retail consultancy Columbus Consulting, said having access to a broad range of demand signals could have "tremendous impact" on a variety of forecasting environments.
"Where you have VMI [vendor-managed inventory] and are moving information upstream, this would allow you to do it in a timelier manner than you would with traditional VMI," Harden said. "It could also give you early recognition of trends, particularly in relationship to seasonal products."
Harden said demand signals could help manufacturers and retailers recognize trends in the movement of fad items that become popular in one particular region and then spread across the country. He also said demand signals could add value to multichannel retailing efforts.
"You could sense things happening with a catalog or e-commerce site and send that information back to the retail stores," he said.
Looking ahead, Harden said adding weather-related data to the demand information collected by MDS could enhance its potential value. He said maximum accuracy in forecasting is key.
"Days are money," he said. "If you're a week late on a product, it could have an impact and someone else could beat you to the punch."
Dan Berthiaume covers the retail space for eWEEK. For more industry news, check out eWEEK.com's Retail Site.