Demand Planning and its importance in business

When we see the world changing so quickly, the reason is usually obvious with the experience. Whether the sector is construction, manufacturing or trading, there is always an innovative or event that makes the transformation possible.

The outbreak of the corona virus pandemic disrupts people’s work lives and routine behavioural patterns worldwide. As the COVID-19 virus spreads, consumers turned online and companies use online meetings to bring a collaboration within the team and departments. Smartphone capabilities increased dramatically as all the applications can be directly accessed on the fly. When change occurs, consumer demand follows.

Demand planning is cross-functional process that forecast the demand for a product or service so it can be produced and developed to increase profit and efficiently satisfy customers.

What is demand planning?

Demand planning is a process of predicting or forecasting the future demands of a product or service and ensure that it can be made available to the customers on the time of need. The goal is to have a balance between having sufficient stock in inventory to meet customer need without having a surplus or over stocking.

A wide variety of factors influence the demands such as change in labour force, economic shifts, weather, natural calamities or global crisis.

Why is demand planning important?

Keeping up with the demand is critical, efficient demand planning brings both profit and customer satisfaction by helping business maintain the right balance. The main goal is to have sufficient inventory levels to meet consumer demand avoiding supply chain disruptions and shortage on products, and to prevent wasting money on storing surplus inventory.

Ideally, demand planning works as an active part of an Enterprise Resource Planning (ERP) software to forecast purchase, stock requirements and forecast customer buying pattern to meet their requirements.

Elements of demand planning 

  • Gathering data from both internal and external sources to predict demand 
  • Analysing statistical history of sales, inventory and other related data 
  • Displaying the data to predict future demand 
  • Team up with suppliers, manufactures, salesperson and other executives to collect information on events that possible affect demands like promotions and production delays.

Steps for successful demand planning

Demand planning is a multi-stage process, and it is dependent on the right tools, informative data and the process. The process can be unique based on the product positioning, inventory needs and company goals. The common key steps include:

Form a planning team

Ensure the planning team members are from department of sales, marketing, finance, procurement and other operational departments. A dedicated demand planning analyst specialized in data management & statistics and an IT Manager to address technical aspects of the software are involved.

Gather and prepare data

Data initiates demand planning more than ever. The team reviews all the available information on the sales forecast, history of sales, market study and analysis. With the real-time visibility on inventory movements coupled with sales reports can identify the areas of improvement or help make more agile process modelling.

Develop statistical forecast

Collaborate with the team and develop the type of forecasting models that matches your business and then start developing it. This is done with an ERP or demand planning software, but still some business use spreadsheets or other tools that require more manual effort and are prone to human errors. For better results, the forecast need to be predicted by product, customers or region.

Examine demand forecast

The planning team reviews, analyse and refine the forecast. The team adds the new data as it comes and verifies the impact that makes on the predictions. Questions any information that seems incorrect and revise the modal if necessary.

Analyse results

The plan designed is an initial base version with the historical data. Continually review performance and make regular adjustments to improve the effectives of the planning, reducing error and restructuring process to get the exact execution methods.

Talk to our ERP Implementation Expert. We have successfully implemented 1000+ Horizon EBS solution for various industry in MENA region. Our team experts will help provide you with the appropriate consultants for your implementation. You can write to us at sales@fit.ae or call us at +971 4 353 3727

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