Kao Develops an AI Agent to Support Demand Planning

Kao regards the data it holds as a vital management asset and leverages it to advance strategic Sales and Operations Planning (S&OP). Kao has also introduced an integrated global platform to standardize demand and supply planning while linking data across business, production, logistics, and sales. In addition, product information and demand and supply data are integrated and centrally managed on Kao i-Lake, the company’s platform for utilizing data across the organization.

This enables Kao to generate monthly demand forecasts up to 18 months in advance and daily demand forecasts up to 6 months in advance for all products except limited-edition items. These forecasts provide the basis for production planning, enabling Kao to optimize production and supply based on anticipated demand. This is made possible by one of Kao’s strengths—its integrated supply chain—which enables data from every stage, from procurement to sales, to be leveraged across the company.

The newly developed AI agent Kao-MIKOMIL supports demand planning using an AI-based demand forecast model. The demand forecast model generates objective forecasts based on historical sales data and other information, while the AI agent incorporates information on planned sales promotions, sales channels, pricing, and other measures to generate a demand plan proposal and provide the rationale behind it. Previously, data scientists and business division staff worked together to develop demand plan proposals based on the sales performance of similar products and their experience, while taking into account factors such as product launch timing and planned sales promotions.

With the AI agent, business division staff can review demand plan proposals and the rationale behind them for both new and existing products and determine an action plan in coordination with other divisions. This will help shorten the time required for demand planning, provide greater clarity on the rationale behind decisions, and improve operational efficiency. Repeated use of the AI agent is also expected to accumulate demand planning knowledge and further improve planning accuracy.

To develop the AI agent, data scientists were embedded in the business division to gain a deeper understanding of the challenges and processes involved in demand planning. This enabled them to design a system for medium- to long-term use. The system was first introduced for the KATE cosmetic brand to evaluate planning accuracy and its impact on operations, and will gradually be rolled out to other brands.

Going forward, Kao will make active use of digital technologies, including AI, to improve the speed and quality of decision-making. Enhancing demand and supply planning will help optimize inventory and reduce opportunity losses, enhancing supply chain efficiency and improving ROIC.

Kao, a Japan-based manufacturer of cosmetics, personal care and household products, as well as specialty chemicals, creates high-value-added products and services that provide care and enrichment for the life of all people and the planet. Through its brands such as Curél, SENSAI, and MOLTON BROWN cosmetics, Bioré and Jergens skin care products, Oribe hair care products, Attack laundry detergent, and Laurier sanitary products, Kao is part of the everyday lives of people across Asia, the Americas, Europe, the Middle East, and Africa. Combined with its chemical business, which contributes to a wide range of industries, Kao generates about 1,690 billion yen in annual sales. Kao employs about 31,500 people worldwide and has more than 130 years of history in innovation.
Please visit the Kao Group website for additional information.