What is Involved in Demand Planning?
Demand planning is an important part of any business in order to keep up with supply and demand of products. Here is everything you need to know.
Today, the marketplace can change in the blink of an eye. Now more than ever, efficient supply chain operation is needed for maximum profitability.
Effective demand planning can help you to ensure that your supply chain is efficient. With it, you can keep control of your inventory—and your revenue.
Demand planning is an important part of supply chain management. It encompasses predicting the demand for your products.
With demand planning, you can ensure that you can deliver goods as needed. More importantly, you can keep your customers satisfied.
To learn more about what’s involved in demand planning, keep reading.
What Is Demand Planning?
Demand planning is a broad discipline. However, there are three primary functions within the space. These functions include:
- Product portfolio management
- Promotions management
- Statistical forecasting
Product portfolio management encompasses managing the entire product lifecycle. The process starts with conceiving a new product. It continues until you decide to retire a product.
In many instances, product lines are interdependent. Accordingly, it’s important to understand how new products influence demand for your existing goods.
This understanding will help to inform your overall product mix. With the ideal product mix, you can maximize market share.
It’s also important to consider how your marketing efforts influence demand. The purpose of marketing your products is to create demand for your goods.
For instance, you might execute an in-store giveaway. Alternatively, you might offer discounts or promotions.
These events will help to increase demand for your product. It’s important to correlate how your marketing efforts will boost product demand.
Finally, you can use historical information for demand planning. With statistical forecasting, you’d use advanced statistical algorithms. The data will help you to forecast supply chain demand.
Here, however, accuracy is important. Furthermore, you must identify outliers and exclusions to understand the results of the analyses. For example, seasonal shifts can affect statistical models.
Knowing Where You Stand
With demand planning, you can increase customer satisfaction and boost profit. It will help you to find a balance between maintaining enough inventory and satisfying customer demand.
As you know, this task isn’t easy. It requires organization-wide coordination.
Nevertheless, the implications of successful demand planning are significant. For example, excess inventory can lock up your capital.
Furthermore, it will increase your inventory costs. In a worst-case scenario, you could end up with devalued or obsolete goods.
Alternatively, underestimating demand can result in supply chain disruptions. A disruption can result in backorders, stockouts, and overpaying for raw materials. Even worse, you could lose loyal customers.
For these reasons, it’s important to keep up with product demand. If not, you can lose business or customers.
The goal of demand planning is to keep just enough inventory on hand. This practice will prevent you from incurring shortages.
It will also help you to avoid wasting money. For example, you won’t waste revenue storing excess inventory.
Demand planning can also help you to maximize market momentum. This phenomenon is called the bullwhip effect.
When it occurs, a small surge in retail demand can amplify vendor demand. Demand planning can help you to maximize this effect.
Reaping the Rewards of Demand Planning
Demand planning can help you with product lifecycle management. With it, you can analyze the factors that contribute to the demand for various products.
However, it can also help you with replenishment planning. In this aspect, demand planning can help you to ensure that your inventory is in the right place at the right time.
Statistical demand planning and forecasting are vital for assessing your inventory needs. Typically, you’d need to assemble stakeholders from sales and marketing to build your demand planning team.
It’s also vital to include stakeholders from operations, finance, production, and procurement. Furthermore, it’s important to designate a demand planning manager.
You might also employ a dedicated demand planning analyst. A demand planning analyst can provide you with expertise in data management and statistics.
They can also act as a liaison to your IT department. If needed, they can help you to address the technical aspects of using predictive software. For example, an analyst might manage demand planning, forecasting algorithms, and data reporting. They might also manage application integration.
Getting Started With Demand Planning
Your analysis team would start by reviewing available information. This information might include existing sales forecasts and historical sales data. It might also include surveys and market research.
Often, you’ll find that launching a demand planning initiative involves collecting point-of-sale information. You’d analyze that information using the analytic tools in your demand planning software.
As an example, inventory data can help you to put your sales data into perspective. This information might help you to identify the sales that you’ve lost due to stock shortages. Also, it would indicate a higher demand for items than what you might determine by solely evaluating sales.
Gaining a Competitive Advantage
Today, there’s an increasing amount of available real-time data. In part, much of that information is generated by IoT sensors.
The expansion of real-time data is also fueled by innovations such as artificial intelligence and machine learning. Together, these innovations help to improve forecasting accuracy.
Furthermore, cloud-based tools are empowering demand planners. They’re making it easier for planners to share information. Moreover, the cloud is making it easier for planners to react quickly to market changes.
In the food industry, there’s a drive toward digitizing business processes. Resultantly, the field is undergoing a digital transformation.
Slowly but surely, supply chain participants are connecting. Increasingly, there’s a connection that includes raw material suppliers and manufacturers—and extends all the way to consumers.
This connection is giving supply chain participants finer control over the movement of goods. Furthermore, the trend is helping to support the goals of the food industry. Now, the demand-driven supply chain is becoming a reality.
Winning With the Right Technology
Effective demand planning offers distinct benefits for the food industry. It’s no longer sufficient to operate in a silo.
For example, demand planning supports a collaborative data tracking process. It allows for enhanced data and collaboration between departments. For this reason, companies can react nimbly.
Today, it’s easier for companies to balance the food supply chain with demand planning. Furthermore, it enables companies to optimize the use of resources. These benefits reduce waste and increase organizational efficiency.
Most importantly, demand planning helps companies to keep customers happy. It allows companies to provide timely customer service, improve inventory management, and reduce backlogs.
There are increasing disruptions in the food industry. Demand planning helps companies to balance this circumstance with enhanced agility. It prepares organizations to adjust to rapidly changing conditions.
Finally, demand planning helps companies to measure performance. It enables them to leverage real-time actionable data. Resultantly, firms that take advantage of demand planning are experiencing improved performance across all departments.
Finding a Balance Between Tech and People
Today, companies invest heavily in their success. Firms spend considerable resources on management software. In many cases, however, the results of their efforts have proven less than desirable.
These companies might invest the needed funds in time into innovation. They also work diligently in promoting enterprise innovation.
Still, they don’t generate the results that they expect. Nor do they make any significant improvements.
However, technology isn’t the problem. Companies fail at innovation because they overlook the people component of change.
You must do more than layer technology over your existing operations to succeed. It’s vital to consider the end-users of technology.
For this reason, it’s critical to align the needs of executive and organizational stakeholders. Stakeholder buy-in is the most important aspect of technological innovation. Furthermore, it’s important to measure your results.
Effective leadership is vital to help your organization achieve these goals. By aligning your technology needs with your organization’s goals, you can ensure demand planning success.
Partnering for Demand Planning Success
Now you know more about what’s involved in demand planning. What you need now is a partner who can help you transform your operation.
Adroit has one mission—to improve the performance of your supply chain from farm to table. We have decades of specialized expertise in the field. We can help you develop an agile organization that responds quickly to changing market demands.
Moreover, we can help you to stay ahead of increasing requirements for quality assurance. What’s more, you can empower you to overcome the challenges of multichannel competition in today’s marketplace.
Contact Adroit today at (773) 417-1221 or connect with us online to learn more about creating a responsive, collaborative, and responsive food supply chain.