Accurate forecasts are needed to support the success of new product launches so that Sales can make decisions regarding sales support materials and training, and so Finance can make decisions surrounding corporate budgets and financial expectations. In the absence of historical data, companies typically over-project sales volumes for new products to avoid back orders in the case of sales exceeding projections. This article discusses how advanced analytics and machine learning have shown significant improvements in new product forecasting, analyzing unstructured data to respond quickly to market changes and consumer acceptance, thereby improving the success rate of new product launches.
The article describes the necessary steps to prepare for a successful new product launch. The steps include preparing scenario forecasts (instead of point forecasts), negotiating a flexible contract with suppliers, and quickly dropping products that are not providing enough margin.
The BASF Group's Chemical Intermediates Division develop a portfolio of about 700 intermediate products around the world. Its most important product groups include amines, diols, polyalcohols, acids, and specialties. Intermediates are used as starting materials for coatings, plastics, pharmaceuticals, textiles, detergents, and crop protectants.
The variability and high failure rates of new item launches are often drivers of service issues, unfavorable cost variances, and excess inventories. Combining Predictive Analytics with a rigorous tracking and decision-making process (Predictive Tracking) can minimize these risks and ensure the proper balance of demand and supply. This process begins with a commitment that Demand Planning must be responsible for service, cost, and inventory associated with the launch, and it requires a high-performing relationship with other functions. It is centered on the concept that analytics and communication tactics must be well organized, forcing discussions within weeks of a new item launch that are traditionally completed several months after, when it is too late to take action.