Intelligent demand planning is vital to every thriving supply chain optimization strategy. Accurate demand projections enable organizations to plan ahead and make effective decisions that positively impact their bottom line. However, predicting future demand for your products and services with precision takes significant time and effort. That’s why aligning your business with effective demand planning software is essential. Supply chains are complex systems with numerous variables that need to be anticipated when making forecasts, making it arduous to get reliable results.
In this blog post, we’ll take a look at some of the difficulties linked with the demand planning process in supply chain management and how they can be resolved using advanced analytics and modern technologies. We will also explore various strata where we can find the importance of intelligent demand forecasting in today’s competitive business ecosystem and how it can enable organizations to stay one step ahead of the competition.
Five demand planning KPIs for improved supply chain performance
Understanding and employing the KPIs from the demand planning methods creates a common language to unify critical processes and drive end-to-end performance for all demand planners.
Here are five vital demand planning KPIs that can deliver better performance:
- Inventory turnover
How quickly and effectively is inventory being turned over? As inventory sits in one place for too long without getting sold, the costs increase, and the products become more outdated. These issues can be reflected in scrapped material and money lost, as more materials should be procured to replace the old products, likely at a current and higher rate. With discrepancies in global supply chains and shipping channels, a small discrepancy can result in a hefty financial burden and supply chain management headaches.
This critical metric in the demand forecasting cycle allows companies to evaluate the overall health of the supply chain organization, the factors affecting demand, and the capacity to feed the demand in time. Anticipating the financial planning cycle is essential because it impacts the budgeting, planning, and forecasting periods. Accordingly, reducing the gap between the operational and financial plans can ensure streamlined processing in the various planning efforts happening across complex and large organizations.
- Total sales
Finance professionals are keenly aware of the significant role of total sales in the planning and budgeting cycle. Still, the sales and operations planning (S&OP) process also looks closely at this metric. Sales numbers are essential to understand the bigger picture. The total sales numbers show how the supply chain and operations are performing regarding order fulfillment and keeping your customers satisfied, ultimately generating revenue for the organization.
In simple terms, the idea is to merge financial planning with the results of the operational planning processes as part of the S&OP process. This merger ensures that finance and operations are moving in parallel to measure and achieve organizational goals.
- On-time delivery
Businesses must analyze their supply chain and ensure their manufacturing teams deliver products on time to reduce inventory holding costs and ensure that customer expectations are being adequately met. If this isn’t going as planned, supply chain discrepancies will likely occur and must be addressed.
This problem affects more than just the supply chain. Like inventory turnover, on-time delivery metrics are crucial to recognize in the demand planning process. This can also affect your overall financial planning process, as late deliveries make customers unhappy.
- Gross margin
Is your gross margin hitting projected targets? If not, what might be the reason behind it? It is crucial to understand gross margin and net sales minus the cost of goods sold, and track the overall performance against the projection, which matters to your organization’s supply chain and financial planning.
Forecasting customers and demand volume is a highly efficient way to map gross margin projections. Unlocking accurate numbers of your gross margins can show you the areas for improvement and your overall scalability for future planning.
- Working capital projection
As the saying goes, cash is king, so evaluating the revenue and resources your business needs to meet future demand is important. Understanding how much money and what assets are required to run day-to-day operations matters the most. Working capital projection ensures effective planning of resources, and it gives you complete visibility about where you can invest most of your revenue for high-performance growth.
Boost your supply chain’s performance with intelligent demand planning
Avercast, a division of TransImpact, delivers agile demand planning software to analyze your demand predictions accurately. Our brilliant solutions can empower your business to bridge the gap between demand volatility and ever-changing customer behavior. To explore more about our solutions, schedule a demo or talk to our experts.
