Demand Planning has evolved in the last few years – even banks and credit card companies have seriously been involved in demand planning.
They plan their demand for two important reasons among many others -
- Cash Management – Keeping cash balances to serve customer needs versus loaning out to make a living
- Project retail demand for Gift Cards – somewhat of a much less interesting problem than the first one.
However, they forecast the sale of gift cards by outlet and type. They have displays and floor stands in super markets just like any other Consumer goods company.
Chase may be selling a Mickey Mouse gift card at Target. They have demand planning departments and their own print and design facilities to produce these plastic cards.
Print and ship to stores so they are available during the holidays.
The forecast for Gift cards is truly a unit demand plan – the dollars do not matter at least for producing the plastic. These are loaded at the point of purchase.
They know later how much has been sold from the retailer remittance net of commission.
How does Chase make money – by playing the float!! A portion of Gift Cards remain unused for long periods of time – the bank keeps the money in its lending operations for a long time.
The demand for Gift card is seasonal, holiday driven! They are promoted on TV and at point of sale.
More on the forecasting issues and challenges later.