In recent conversations with supply chain leaders, I’ve noticed a renewed concern around forecasting for new product introductions – a critical business competency.  Get it wrong and damage can last for years: revenue comes up short, brands are tarnished and competitive advantages are lost. Get it right, however, and you can build a virtuous cycle of business improvement.

While methodologies and strategies for new product introduction may differ greatly between, say, a Beer Brewer and a company that makes Lawn Mowers, there are at least two questions they should both be asking themselves from a system point of view:

How well do our technology systems support our approach?

How well should they?

To answer those questions, let’s first distinguish between the three primary types of new product introductions.  As you progress from one to the other, there is less modeling support a system can provide to support your professionals.  But, no matter the type of product introduction, a system can and should be able to provide great value in supporting the practices/processes and disciplines that are the hallmark of companies that do well in product intros.

The most common type of new product intro is the “Replacement” introduction: the new and improved, longer-lasting, better performing version of an existing product.  For the replacement Intro, there is a substantial amount of support that can and should be provided by your forecasting platform. You can imagine building a template that includes information such as product history, replacement history, money supporting the launch, the time of year, the weather, the demographics, competitive activity, overall market growth, etc.  All of this information and more should be used as a profile input to the introduction within the system in order to provide a more accurate forecast for the launch.

The second type of new product intro is a completely new product.  It is consistent with your overall line of business (a new type of paper if you are paper company, a new speaker if you are a speaker company etc.) but it is new – not replacing an existing product.  Perhaps it is getting you to a new price point or market demographic and there is less data and therefore less modeling support that can be provided by a forecasting/planning system.  However, through the use of wizards, a company can make sure there is rigor and consistency used to think through the components and to use the platform to the degree possible.  Wizards can be used to ensure the team thinks through the market size and its growth, the competitive landscape, the market share you are targeting, the budget behind the launch, past similar launches, potential cannibalization of existing products etc. With this information, a decent forecast can be produced and used to ensure operational and product support and to monitor the launch so that you can support in the optimal manner.

Lastly, there is the new product in a new market type of new product introductions.  You make shoes and you want to enter the fresh produce business (perhaps the thinking is that the farmers who grow your lettuce will use your shoes/boots…).  So here, even less experience and data than the prior types and so less that the computer can do to help accurately forecast but again the platform can provide the wizard/template to ensure that the data that is available is used to the best possible advantage. Information again like the market size and growth, your desired market share, $ support etc. can be used to model best case/worst case scenarios, impacts on your existing business and in general gain a common understanding within the business of what needs to be done and what are the probable outcomes and make sure that the supply side is a prepared as possible to support.

There is a fourth type of new product introduction that is centered on short life cycle event driven products such as action figures tied to a movie release; pretty specific, not real common but good to know.

And then lastly, technology systems should provide an understanding of how well demand is on track – right now – to hit projections: exceeding or falling short. Typically, this is accomplished best by utilizing downstream data inputs (like VMI or Point of Sale data) that sense what is happening on the front lines (thank you Garnter/AMR). This needs to happen in as close to real-time as possible so you can react/adjust before too much damage is done if the product launch veers to far from the plan.

So when thinking about forecasting and planning for  new product introductions, technology platforms should be able to support different types of introductions, reinforce the need for quality information, strengthen process and discipline, help manage the performance of the introduction and generally provide the platform to help your professionals to succeed in this critical business activity.