We’ve discussed the benefits of gathering data and coming up with a strategy of collaboration when implementing a demand planning cycle. Now it’s time to walk through the importance of Performance evaluation in the Demand Planning Cycle by setting metrics and KPIs.
Demand planning strikes the balance between having sufficient stock levels to meet demand without having surplus as the end goal. But setting performance and KPI objectives allows you to understand business targets and find ways to continuously improve your business. It also creates an opportunity to benchmark your company’s overall performance. By having performance metrics and KPIs, you’ll be able to see where your weak points are in your supply chain. You will then be able to correct those issues before they become major hurdles to your ongoing success.
One of the keys to measuring your Performance in the Demand Planning Cycle is Forecast accuracy:
Forecast accuracy
When you create a demand plan, there’s usually a margin of error, which is what you use to figure out forecast accuracy. It’s the deviation of actual demand from the forecasted one. By finding out the forecast accuracy, you can factor this into your future demand plans and make the relevant adjustments. One of the best ways to ensure forecast accuracy is leveraging automation technology. The functionality will automatically calculate the forecast errors. But in order to implement an automated approach you’ll need to ensure your data and cross functional collaboration is in order in the system.
Demand planning may seem like a big challenge to implement but it improves your business accuracy, saves time, and ensures greater revenue. Effective demand planning will assist your business to foresee challenges and react accordingly.
Want to know more about Demand Planning? Check out our other resources:
Why is Demand Planning important?
