What is Cannibalization Impact, and how does it work?

Introduction:

Cannibalization impact is the reduction in the sales of a company's products due to introducing another similar product.

Cannibalization impact: While creating an NPI Plan, you can also decide if the new product launch will impact existing product sales. If yes, choose the products whose sales are affected by the NPI.

While choosing the products, you have to provide the following details.

1. Estimated impact (%):  

   1. The percentage reduction of growth. 

   2. The percentage impact applies to the Input time series selected. 

   3. If the input time series is “Statistical forecast units,” then the percentage impact is on the Statistical forecast units.

   4. The estimated impact (%) per product should not exceed 100%

2. Impact starts from

   1. Introducing a new product might not impact the existing product’s sales on day one. Hence, we provide a flexible option to decide when the impact will start.

   2. The impact start date should be the “future period.”

3. Impact end on: This is the day on which the new product introduction impact ends on the existing products.

   1. Select date: The new product impact will exist for the first few weeks or months, and then slowly, it can be reduced. You can decide when the NPI impact on the existing product will end. This option lets you choose when the cannibalization impact should be computed.

   2. EOL(End of Life):  The option allows you to compute the cannibalization impact on the existing product till it reaches the End of Life(EOL).

   3. Note: Providing an “Impact end on” date is NOT mandatory. If no date is provided, the impact applies across the future horizon. 

4. View trend: The trend should be displayed based on the “input measure” selected.

Below is the screen recording for the cannibalization impact.

Cannibalization impact in the NPI Planning grid

If the Cannibalization input is selected in the results table, the NPI Planning view will automatically show the following time series.

• Cannibalization impact: 

  1. The Estimated Impact (%) provided for the impacted items while creating a plan will appear in the table.

  2. In the above screen gif, the cannibalized item is "1002: etab 2001", and the impact % = 45%, and the  Impact period is from May 2023 to May 2025

• Revised forecast:

  • Revised forecast = Input measure (1 - Cannibalization impact)

  • Note: The input measure can be a future-oriented time series, such as Statistical forecast units, a Consensus demand plan, or historical data, such as Shipped Units or invoices. 

  • In the above screen gif, 

    • the statistical forecast units for May 23= 21,640, 
    • the cannibalization impact = 45%.
    • Hence the revised forecast for May 23 = 21,640 x (1 - 0.45) = 11,902

Note: Cannibalization products will not be considered an input (like products) while generating a Base NPI forecast. However, if the Cannibalization product is also a like item, it will be considered as input for generating the Base NPI forecast(the regular flow)