Digital transformation through technology has become a vital strategy for businesses in different industries to effectively handle operations in today's volatile business ecosystem. With improvements in modern technology and the abundance of data, organizations are leveraging digital tools and strategies to enhance different strata of their operations, like applying robust demand planning software to their supply chain management.
Traditionally, demand planning vastly relied on manual processing, subjective decision-making, and limited data sources. However, recent technological advancements have shifted significantly towards data-driven and automated demand planning processes.
What Is Demand Planning?
Demand planning is the method of forecasting and evaluating future customer demand for a service or a product. It includes analyzing historical data, customer behaviour, recent market shifts, and other relevant factors to predict the number of products that will be required in the future. An efficient demand planning process plays a pivotal role in supply chain management and delivers accurate inventory levels, production schedules, effective procurement processes, and overall streamlined operational planning. It allows retailers and e-commerce businesses to predict future demand for their products and then implement apt inventory strategies to meet that demand.
Demand Planning vs Demand Forecasting
In every business, demand planning and forecasting are like siblings. Their characteristics are similar, but they still have some minor differences.
Demand forecasting anticipates consumers' demands by analyzing historical data and customer buying trends to predict future demand. Your forecasts will also include how seasonality and supply chain disruptions might affect these demand projections.
Demand planning takes demand forecasting a step further. Rather than projection, demand planning ensures you have enough resources to meet this demand.
With, many businesses utilize the phrase demand forecasting and demand planning interchangeably when implementing demand management.
The Value-adding Factors of Demand Planning in Supply Chain Management
Resource Management Optimization
Demand planning helps businesses align their inventory levels with all sorts of peaks and valleys in demand. In other words, demand planning makes it easier to adapt to ever-changing fluctuations in demand due to seasonality and disruptions in customer behaviour. This way, you can maintain appropriate stock levels where you want them. This adaptability enhances resource management since you will only spend excess money on inventory that leaves your warehouses.
Prevents Stockouts
It's safe to say no one enjoys stockout situations. Stockouts irks your customers, but they also cost you severe amounts of money since selling out means leaving more money on the table. The good news is demand planning software helps you identify how much inventory you require to meet future demand—everything without creating a surplus of products at your disposal.
Effective demand planning allows you to order a suitable amount of inventory at the right time. This way, your inventory levels never drop too low, and you don't have to bang your head against the wall due to stockouts.
Reduces Excess Inventory
Excess inventory is just as bad as stockouts. Sometimes, it’s even worse. That is because the longer that extra inventory goes unsold, the more it burdens you with additional handling and inventory space. It gets more harmful if your products come under the perishable product category. These dead stocks mean lost revenue with a whole lot of waste.
Demand forecasting avoids this problem by aligning your sales and forecast data. This way, you can make smarter decisions about your inventory replenishment strategy that lower your risk of overstocking.
Meets Customers’ Demand
Customers always expect more from their favourite brands. For example, they want intuitive delivery and return management so they can easily place or replace orders. And they look for products to be available and ready to ship whenever possible.
When demand planning is done the right way, you will always have the products your consumers are shopping for in stock. This means you can meet the demand, and you can also guarantee immediate delivery.
Demand Planning for the Future
The advancement of demand planning software continues to improve businesses’ abilities to evaluate the quality of their forecasts. For example, you can attach this software to your ERP systems to pull historical data, enabling your enterprise to integrate actual information into their planning and analysis.
Technologies like advanced analytics can help with effective demand processes by delivering real-time data on the progress of raw materials and stocks. With this tool, you can also track revenues in real time and quickly regenerate your inventories and storage spaces where items are selling out sooner than predicted.
This easy accessibility can allow you to utilize a pull system to streamline supply or stock levels and keep the costs and headaches at a minimum.
Moreover, demand forecasting software is vastly focused on artificial intelligence and machine learning to scrutinize huge data to spot patterns and trends that would go unnoticed due to human error. Demand planners can then utilize this valuable information to make real-time corrections to their plans.
Knowing where to apply effective strategies that can help optimize a flexible, toned, and data-driven output will reveal more methods to reduce costs in processing, increase profits, and deliver the most significant strategic edge. It will bring a new perspective to reduce expenses in operations.
When done correctly, demand planning can be critical to achieving higher success in business and your supply chain's profit margins.
Scale Your Business and Achieve Maximum Cost Savings with Avercast
Avercast, a division of TransImpact, delivers high-performance demand planning software for end-to-end visibility and accurate forecasting. With 280+ algorithms, our brilliant solution can empower you to make more informed decisions about your supply chain's entire processing to strengthen your bottom line and boost your profits. To learn more about our solutions, schedule a demo or talk with an expert.
