Demand Planning: What Is It and Why You Absolutely Need It
Forecasting future demand is one of the most valuable activities your organization can undertake. A demand plan’s impacts are felt throughout every line of business, from sales and marketing to manufacturing and distribution. When executed correctly, demand planning can enable your organization to deliver outstanding customer service while meeting financial goals.
What is Demand Planning?
Demand planning is the practice of creating forecasts that predict the future need for your products. This demand can either be external, such as customer orders, or internal, in the form of raw materials needed to create products.
The individuals who are responsible for demand planning gather information from the sales and marketing, operations, and finance departments to estimate how many products customers will want to buy at various points. They then create a demand plan to influence supply planning. For example, if demand planners spot a future need for a certain type of raw material, you can use this data point to plan to increase the hands-on supply of that product.
Effective demand planning enables organizations to be more proactive, and puts them in position to adapt and avoid last minute, costly disruptions. Improving demand planning provides countless benefits, including:
- Lowering costs of inventory
- Reducing stockouts
- Reducing waste
- Increasing on-time deliveries
- Opportunities to negotiate better pricing or terms with suppliers
Demand Planning & Forecasting
Why You Need Demand Planning in Your Organization
Failure to adopt an automated cloud-based statistical forecasting and planning approach can cause serious problems, which can result in a wide array of issues including missed deadlines, poor customer service, and the need for expedited shipping. These issues drive up operating costs. Poor demand planning can also create excess stock, which can lead to waste.
Because of the issues created by poor demand planning, organizations are increasingly adopting sophisticated demand planning strategies that are leveraging data rather than solely relying on instinct. Organizations that continue to leverage spreadsheets or ill-fitted planning tools may fall short in developing up-to-date reliable forecasts.
Demand Planning Evolution
In the past, organizations used common supply-oriented strategies when managing their production process. This process was less about the customers’ needs, and more about stocking shelves. Organizations were merely creating inventory, rather than producing inventory according to anticipated demand.
Today’s market emphasizes a more demand-focused approach. This strategy is collaborative and data-driven. Supply chain operations are now able to produce and deliver products that are based on a predictive plan. This new model ensures higher levels of service and operational efficiency, along with lower costs.
To keep up with rising customer expectations, supply chains teams are adopting purpose-built demand planning software that enables organizations to process large data sets, spanning multiple years, using sophisticated algorithms, at a level of data processing that no human can accomplish using spreadsheets. Some benefits include:
- Aggregating data
- Improving forecast accuracy
- Collaborative forecasting and planning across the entire supply chain
- Simplifying data visualization
- Empowering planners to identify problems sooner to allow for proactive action
When organizations incorporate demand planning software in their operations, they provide their organization with a collaborative forecasting system that is accessible to individuals in all areas across the supply chain.
Do You Need a Demand Planning Software?
Now you know what can happen without an accurate demand forecast. If you do not use proper demand planning techniques, you risk sacrificing production accuracy and falling behind in completing orders.
Vanguard Predictive Planning™ for demand planning is a tool built both for collaboration and analysis. Advanced workflow capabilities, a market-leading Collaboration Hub, and consumable analytics enable organizations to achieve better performance.
Request a demo to find out how Vanguard Predictive Planning for demand planning could help your organization.
Demand Planning for Manufacturing