What is Demand Planning?

what is demand planning

Demand planning helps ensure deliverability and satisfaction of your customers through a supply chain management process of forecasting and predicting demand. The goal is to find the balance between having sufficient inventory to meet your customer’s needs without having surplus. 

Firstly, it is important to have an accurate prediction of demand including:

  1. What goods we will need
  2. How much of each item will be called for
  3. When we will need the goods
  4. Where the items need to be at the time we need them

Also, there are many factors that influence demand, which are knowns like customer’s sale cycles and seasonal orders. Moreover, unknown factors like disruptions caused from severe weather, natural disasters, global crises, labor force changes, and economic shifts.

Demand planning helps with the ebbs and flows of a changing marketplace. It enables manufacturers to be proactive rather than reactive through the process of analyzing current and upcoming demand to create reliable forecasts for your business. It usually includes: 

  1. Reviewing historical data
  2. Customer forecasts
  3. Statistical forecasts
  4. Collaborating with customers

In businesses without successful prediction of demand, each functional area of the operation is left to pursue their own objectives; which means they are out of alignment on activities and are not supporting the business’s over strategic direction. In turn, they’ll be reacting to changes in the business environment; which usually results in costly responses to changes in the marketplace.

However, organisations that are successful at demand planning have collaborating functions working together to achieve the corporate strategic objectives. This cohesion is advanced by a better-connected supply chain and demand planning strategy.

The demand planning cycle

Successful businesses have implemented the demand planning cycle. They gather data and information, create forecasts, resolve volume relationships, apply judgment, and document as they go.

Why is demand planning important?

Why is demand planning important? Prosperous businesses are able to plan for the peaks and valleys in their sales cycles, which enables them to manage current business volumes and plan for future growth.

Roles and responsibilities of demand planning

The roles and responsibilities of demand planning usually fall under the purview of the supply chain manager. So, the goal of the demand planner is to drive the demand and inventory levels.

What are the key features of demand planning?

The key features of demand planning provide a single version of the truth, which prevents issues of iterations and manual record keeping. It allows for extended collaboration across multi-enterprise businesses. This means we can share solutions and learnings across facilities, which saves on time and drives value for your business. It also means that you can empower your facilities to run autonomously with management by exception as the data is driving the business forward. Lastly, intelligent data cleansing across your multi-enterprise business can take place, which means you’re not left repeating the exercise across databases.

Demand planning is uniquely benefits from a digital landscape. Therefore, advances in applications of machine learning within the supply chain have made it possible to adapt and update forecasts in real time, allowing inventory to run leaner, without missing the mark on customer requirements.

Also, successful enterprises are able to implement artificial intelligence and machine learning programs that can help optimize a lean, agile and data-driven approach, which in turn cuts costs in operations, boosts revenue and offers a greater competitive advantage.

Finally, demand planning can be a pivotal process in boosting a supply chain’s profitability and is best achieved with a unified supply chain.