The success of a supply chain is often linked to its efficiency, which can be traced back to the ability of managers to conduct accurate forecasting when it comes revenue and inventory. Demand planning is an integral part of the supply chain and perhaps the most crucial function of any enterprise.
Demand planning is the supply chain management process of forecasting demand so that products can be reliably delivered and customers are always satisfied. Effective demand planning can improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and enhance profitability for a particular channel or product. Demand planning uses analytics that examines historical sales data, customer orders, shipments, current sales, and market indicators to better predict demand patterns based on market changes, enabling firms to make smart decisions about inventory and production levels.
Good demand planning is highly accurate, based on data and enhances profitability. But the process can be tedious, time-consuming and easy to mess up. One area of a supply chain, such as procurement, may improve its ability to forecast future demand, but logistics and manufacturing may lag behind, leading to higher levels of inventory and escalating costs. If demand plans can’t be adjusted with agility, companies could end up with stock-outs and unhappy customers, or warehouses full of unused inventory, unhappy finance managers, and millions of dollars in wasted capital.
Without proper demand planning, supply chains wind up dealing with production delays, inventory surpluses and strained relationships across the various disciplines that make up an organization. Avoiding such problems would call for demand planners that combine technical and business knowledge with collaboration and communication skills. The ability to influence department leaders that partner with demand planning is key, as well as the skills to interact intelligently with leaders across the organization because supply chain initiatives often reach across business units.
In today’s market, the ability of your supply chain to adapt to demand changes is growing more complex as the market evolves. Successful supply chains are able to adapt by implementing strong demand planners and building systems that can sense and respond to demand volatility.