Demand planning can be explained as a collaborative approach within the various functions of an organization – usually marketing, sales, and finance and supply chain – which have the aim to arrive at an unbiased, single and consensual forecast of customer demand. Effective forecasting can guide the users to improve the accuracy of revenue predictions, align every inventory level with peaks in the demand along with increasing the profitability level for a particular product or channel.
Those organizations that are willing to establish or improve their demand planning process should undergo a demand planning design activity. In simple terms, it requires the organization to give answers to some basic yet tough questions:
- Why fore cast
- What to forecast
- Where to forecast
- When to forecast
- How to forecast
Within the process of predicting demand, the organization should clarify the rationale and purpose of planning demand with respect to its business purpose and meeting customer expectations. Companies that do not forecast customer demand deem to fail in their operations and it can cost them heavily. Predicting the future demand of customers allows an organization to plan and organize its business so as to meet and win the expected customer demand. It offers an insight of the future market and makes way for the organization to develop their actions for meeting this future demand.
Steps involved in demand planning
- Importing historical marketing and sales data
- Making statistical forecasts
- Collaborating with business customers
- Importing consumer forecasts
- Collaborating supply and demand
- Securing constrained forecasts
- Confirming with customers
- Reevaluation of data and adjusting plans accordingly
Nowadays where enterprise resource planning has become an important tool for business, there are various demand planning tools that can effectively predict customer demand.in this way, businesses are able to plan better for their future production and inventory. Planning demand is a part of the supply chain process and the tools involved aims in enhancing ways companies serve to their customers.
In many ways, demand prediction is somehow similar to the other forms of demand management. A major difference is that while the other types of demand and supply chain processes handle the short-term customer demand management, predicting demand is usually a long-term feature. It is very useful for businesses to contemplate demand that might occur in sometime in future and not the demand which occurs at a given time period. In this way, organizations can prepare for the future. The benefit associated with demand planning includes sales increment, as the company will be able to meet demand. Tools for planning demand include predictive analytics or making use of current information for predicting the future.
Demand planning is a particular feature of supply chain management. It is made a part of the SCM because the raw supplies that come within the business locations are kept for manufacturing products for delivering to the customers when demand takes place.
Anticipating demand in advance is very useful since organizations can predict what they need to do in future or what changes within their business operations and demand will take place in future. It paves way for remaining healthy and strong in the market and to fulfill customer demand efficiently. It can be considered as a baseline process which allows improvement in every aspect of business. Demand planning allows organizations to tailor their ability and capacity, withier in production or service so as to meet the variations in demand or to alternatively manage the demand level by using the supply chain or marketing strategies for clearing out every potential problem that may arise. It aligns the functions of every department so that the entire organization works together for not only fulfilling future customer demand but also taking the business to the next level. Organizations should aim in determining the best way for predicting the level of future demand for its products and services. In this way, they will be able to meet both goals and future demands efficiently.