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November 9, 2021by Shashiraja
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In recent times, an increasing number of companies are joining the bandwagon called ‘Demand Planning’. They are keen to ensure that their supply chain processes perform well and stay ahead of the competition.

Demand Planning and its Compatibility with Inventory Management

Experts refer to demand planning as a cross-functional operation. It enables all the various aspects of a business to come together and flow smoothly. Demand planning also ensures that there is reduction in excess inventory. Excess inventory makes heavy inroads into working capital and ensures extra costs on inventory carrying. It can even make existing products obsolete due to changing trends. Demand planning when done in the right way can help in managing inventory effectively, bringing efficiency in the supply chain, enhancing customer satisfaction, and boosting profitability.

Demand Planning is Essential for Supply Chain Management

There are three features of demand planning. The first one is sales forecasting. Sales forecasting studies data from internal and external sources to predict future trends. Second, data analysis helps the sales and operation teams to make plans for manufacturing/purchasing products to sell (supply chain management). The third aspect is the ease of inventory management.

Usefulness for a Company’s Bottom Line

  • Visibility: A well-functioning and highly effective digital supply chain system brings all the information about primary, secondary, tertiary stock and sales into display across various channels. This helps in streamlining sales and delivery procedures.
  • Automation: Manual work is always prone to human errors. Therefore, it helps to have automated processes in place.
  • Data-Driven Management: Automated supply chain management includes converting available data into comprehensible reports and insights. Data analysis also serves to predict outcomes of existing demand-supply trends, recognize failures on time, and use insights to develop powerful profit-making strategies.
  • Customer Loyalty: Getting customers onboard is the first step towards creating a trustworthy bond between buyer and seller. This is possible by offering promotions, discounts, rewards, multi-brand loyalty programs, multiple redemption choices, etc.., and keeping in touch. It is essential to monitor buying behavior regularly too.
  • Preventing Counterfeiting: With intelligent anti-counterfeit software programs in place, customers need never fear the appearance of duplicate products. In addition, the company may even take steps to prevent unauthorized distribution of products/services.

Key Considerations while Implementing a Demand Planning System

  • Building a Team: Every member of the demand planning team should have well-defined duties and responsibilities.
  • Forecasting Accurately: All team members must reach a consensus on what data should fall in the category of internal data for making accurate forecasts. They could include information about inventory turnover, trends by location/channel, production times, marketing campaigns, new launches, etc.
  • Gather External Data: External information includes changing trends in local and global marketplaces, the performance of suppliers and distributors, purchasing behavior, etc.
  • Creation of a Statistical Demand Forecast: The company may use demand planning software to build the pre-decided forecasting model. The business may even make bold predictions and always work towards being ‘ready’.
  • Work on the Demand Forecast: All the main stakeholders may come together to review the forecast, reanalyze it if necessary, and make final refinements. It would also be good to weigh the demand forecast against the establishment’s financial forecast too.
  • Check Inventory: Is there sufficient stock to satisfy customer demands? This is the cycle inventory. The establishment should take note of buffer inventory too. In other words, vendors should be willing to supply stock immediately, in alignment with increased customer flow.
  • Evaluate Performance: Key performance indicators (KPIs) may come into play for determining if the company has reached its pre-decided targets or not.

Benefits of Demand Planning

  • A significant benefit is its uncanny ability to accurately forecast product behavior in the marketplace and its expected annual revenue.
  • Creating a temporary/permanent timetable for production timings, stocking of warehouses, shipments, maintenance work, and revamping official websites becomes easy.
  • It becomes possible to streamline the labor force such that extra workers are always available during peak periods.
  • It helps to manage the cash flow more effectively, such that suppliers and vendors receive timely payments.
  • Finally, demand planning enables the prediction of reductions in sales. This way, the organization can buffer itself against any financial crises.

Drawbacks of not having Demand Planning in Place

Without demand planning, product portfolio management is impossible. The appearance of a modified version, or even an entirely new product, affects the old product’s life cycle or selling power. This should prompt the business to go in for a mix of products for garnering maximum market share. Similarly, businesses may be ignorant about statistical forecasting. Products tend to perform differently in diverse marketplaces, during peak periods and seasonal shifts, etc. Unawareness about current and future performances may permit competitors to forge ahead. Trade promotion management (marketing events) is another essential characteristic of demand planning. This is vital for retailers keen to build up their respective brands.

The demand planning system may require more significant streamlining to become perfect. Regardless, it can only provide substantial advantages for any business. It always helps to have intelligent platforms like DforD in place for efficient and effective supply chain management. This way, customers will always remain satisfied with the products, the company’s services, and resolution to unexpected problems.

About DforD

Data for Decisions Technology Solutions Pvt. Ltd. is a cloud platform integrated with the supply chain ecosystem to provide Transparency, Efficiency, Counterfeit Detection and Reporting for Manufacturers, Distributors, Retailers and Consumers. It is simple and user friendly to adopt and use.

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