What is Demand Planning? Good handling of market demand data is one of the most vital concepts in any supply chain. The correct management of demand information can greatly influence the level of responsiveness and directly impacts customer service, inventory level, and ultimately revenue. To serve the right customers with the right products at the
What is Demand Planning?
Good handling of market demand data is one of the most vital concepts in any supply chain. The correct management of demand information can greatly influence the level of responsiveness and directly impacts customer service, inventory level, and ultimately revenue. To serve the right customers with the right products at the right time, a good estimate of the demand is indispensable.
This requires the involvement of many parties: Finance, Marketing and Sales, but also external parties such as key customers and channel partners. After all, your channel partners’ sales or your key customers’ consumption will be more revealing than your own historical sales order pattern. In each business, 20% of the customer’s account for 80% of the revenue. So instead of trying to guess what those customers will buy, ask them!
Getting these volumes right will stabilize your supply chain, thus lowering your costs. It will create flexibility to maneuver in the rest of the business where such opportunities are not possible.
5 key steps
A good demand planning process consists of five key steps, one of which is collaboration. Any forecasting process starts with analyzing your sales history and cleaning up data.
Next, statistics are used to generate a quantitative forecast. It makes Sales’ life easier since they can focus on erratic figures and – because people have a natural tendency to over-forecast – it helps to remove bias from the forecast.
Furthermore, you have to rely on a collaborative process within and beyond company boundaries to receive the crucial demand data about e.g. product launches, promotions planning, and end-of-life products. Ensure that you check the value-add of each of the different forecast versions and include a feedback cycle.
Finally, to reach a consensus forecast, plan a monthly demand review meeting, ensuring qualitative input for the supply planning process.
The Results of Good Demand Planning:
Customer Service Level
A drill down on exceptions allows you to intervene proactively, thus avoiding service issues. Meanwhile, taking account of things like campaign planning leads to a better overall customer service level.
Better collaboration with external parties on the demand forecast decreases the need to keep excessive safety stocks. Moreover, improved channel forecastability reduces your inventory and costs alike.
Working Capital Requirement
By improving your forecast by just 1%, you can already make great strides in increasing your working capital. Having the buy-in of all parties involved further enhances the forecasting accuracy.
Did you know you can easily achieve 30-40% more efficiency with a good process and tool
On demand webinar
In this webinar Bram Desmet, CEO at Solventure talks about “How to manage demand in uncertain times”.
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