What is Demand Planning?
Demand planning relates to analyzing sales, seasonality data, historical sales, and consumer trends. It helps efficiently optimize the business to fulfill customer demand.
Achieving this goal requires demand planning to combine supply chain management, sales forecasting, and inventory management. It uses data to predict future demand through external and internal sources. The forecast of demand planning informs operations and sales strategy to plan products to meet the demand.
How does demand planning work?
Demand planning helps achieve and maintain effective lean supply equilibrium. The process enables projecting future demand, be it services or products, and customizing the output successfully, as per the projections.
It is a way of achieving a perfect balance between surplus and sufficiency. The main concern of any demand planning is maintaining the balance. Hence, the need for the constant effort to shape demand ensures it is in use effectively.
Effective demand planning requires using the techniques of business forecasting to predict demand trends, expenditures, sales, profits, and the benefits denoting company efficiency and customer satisfaction.
What is the role of demand planning in businesses?
The role of demand planning requires coordination and input from several departments. It includes marketing and sales, supply chain management, purchasing, production, operations, and finance. In addition, the executives must manage the product portfolio management and the business’s overall strategy. These are crucial roles of demand planning that dictate the lead times for production and components.
Demand planning in businesses touches most business functions, no matter who handles the role of demand planning and the location. It can be integrated with other departments or an individual group managing the demand planning. It is useful for business forecasting and is successful when linked closely to marketing and sales.
Elements of demand planning
1. Management of product portfolio
Demand management requires an understanding of products and their lifecycles. As many product lines’ lifecycles vary, product portfolio management reveals how shifting demand may affect the nearby products.
2. Sensing demand
Sensing demand with the combination of data, government data, trends, weather, and historical trend data is possible. Applying Artificial Intelligence (AI) helps detect demand influences and disruptions in real-time.
3. Statistical forecasting
Considering history is the traditional concept, and is useful for statistical forecasting and predicting future performance. Analyze historical data using complex algorithms and develop forecasts to balance supply chain management. Statistical forecasting mathematics is advanced and so acquiring accurate data is not impossible.
4. Trade promotion management
The retail jungle relies on the potential customer’s interest. Marketing strategies and trade promotions are a way of spiking customer demand. These opportunities are when trade promotion management executes and delivers benefits meeting expectations.
What are the demand planning best practices?
Demand planning is a complex process. It needs to focus on best practices to increase accuracy. The best practices are through a lot of collaboration and include:
1. Having accurate data on the inventory. Successful demand planning is possible only with accurate and efficient inventory management.
2. Buy-in and get demand accountability from stakeholders. You can get the details from collaborative forecasts, artificial intelligence, and statistical modeling that pulls from various departments the essential data.
3. Include information. It refers to acquiring information from weather events, supply chains, market shifts, natural disasters, and consumer buying behavior as forecasts. It is a process known as demand sensing.
4. Shape promotion, marketing, and pricing tools with demand. The key practice is to choose an appropriate demand planning software. It should automate tasks, track KPIs, perform forecasting, and calculate stock levels. Thus, allow teams or individuals to collaborate with groups, interpret results, and adjust to essential plans.
