Why is Demand Planning important?

Why is Demand Planning important?

In our article What is Demand Planning, we asked ourselves why is Demand Planning important? Prosperous businesses are able to plan for the peaks and valleys in their sales cycles. It enables them to manage current business volumes and plan for future growth. 

If your product isn’t available and there is demand for it, you lose out on revenue. You could also lose the customer to a competitor. Or, you’re sitting on unused inventory, which takes up space and production costs unnecessarily. With demand planning, business leaders can be proactive around market shifts and make decisions while also being responsive to your customer’s needs. This is where implementation of a demand planning cycle will improve your business’s ability to proactively meet market changes and beat out your competitors.

The key advantages are:

Improving product forecast accuracy with upstream supply planning

This process assists supply chain managers to accurately forecast product productions and expected revenue through the use of upstream supply planning. By upstream planning, you prevent out-of-stock, overstock, or idle stock situations, which can be detrimental to your business.

Increasing supply chain scheduling

Predicting and analyzing sales allows your business to plan production, warehousing, budgets, and shipping schedules. By doing this, you can plan shutdowns, updates, or reboots around busy periods as well as creating accurate sales targets.

Optimizing labour management

By demand planning, you’re better equipped to plan for busy periods and have the staff on hand for those times. This way you avoid bottlenecks and are able to fulfill customer orders on time.

Creating efficient cash flow management with financial planning

It gives you insight into cash flow. so you don’t get into situations where funds are tight, or worst of all, you can’t pay your vendors and suppliers. Moreover, financial planning can help you predict any shortfalls in sales, which means you can plan for those leaner times.

The decision making process happens before the point of sale. That is why demand planning takes the risk out of daily operating decisions. A smooth-running supply chain makes or breaks a business. That is why it’s crucial for the business to invest time and energy into optimizing their supply chain and demand planning processes.

Want to know more about that subject? Check out our other resources:

The Demand Planning cycle

Roles and responsibilities of demand planning

Demand Planning Key Features