What is Demand Planning?

Demand planning is a supply chain management process of forecasting the demand for products or services so that they can be produced and delivered more efficiently and to the satisfaction of clienteles. It is the prediction of what a company intends to sell in the future (i.e., future demand). It involves determining what demand there will be for each product a company sells and then building plans to support this estimated demand.

Demand planning is important because it helps companies to:

Meet customer demand: By forecasting demand, companies can ensure that they have the right amount of inventory in the right place at the right time to meet customer needs.

Avoid stockouts: Stockouts can lead to lost auctions and customer dissatisfaction. Demand planning helps companies to avoid stockouts by forecasting demand and planning their production and inventory levels accordingly.

Reduce excess inventory: Excess inventory can lead to increased costs, including inventory carrying costs and the risk of obsolescence. Demand planning helps companies to reduce excess inventory by forecasting demand and planning their production and inventory levels accordingly.

Improve profitability: By improving customer service, avoiding stockouts, and reducing excess inventory, demand planning can help companies to improve their profitability.

Demand planning is a multifaceted process that involves a variety of factors, including historical sales data, market trends, economic conditions, and competitive activity. Companies use a variety of forecasting methods to predict demand, including time series analysis, causal analysis, and judgmental forecasting.

Demand planning is an ongoing process that should be updated regularly as new information becomes available. This helps companies to ensure that their demand forecasts are as accurate as possible.

Here are some of the key steps in the demand planning process:

Collect data: The first step in demand preparation is to collect data on historical sales, market trends, economic conditions, and competitive activity. This data will be used to forecast demand.

Analyze the data: Once the data has been collected, it wants to be analyzed to identify patterns and trends. This will help to identify the factors that are driving demand for the company's products or services.

Select a forecasting method: Once the data has been analyzed, the company needs to select a forecasting method. There are a variety of forecasting methods available, such as time series analysis, causal analysis, and judgmental forecasting. The company should select a forecasting method that is appropriate for its products or services and the level of accuracy it requires.

Generate a forecast: Once a forecasting method has been selected, the company can generate a forecast of future demand. The forecast should be specific to each product or service and each time period.

Review and update the forecast: The demand forecast should be studied and updated regularly as new information becomes available. This will help to ensure that the forecast is as accurate as possible.

Demand planning is a critical process for any company that wants to be successful. By accurately forecasting demand, companies can meet customer needs, avoid stockouts, reduce excess inventory, and improve their profitability.

How do you start demand planning?

To start demand planning, you can follow these steps:

Assemble a team. Demand planning is a cross-functional process, so it is important to assemble a team with representatives from different departments, such as sales, marketing, production, and finance.

Define your goals. What do you hope to achieve with demand planning? Do you want to improve customer service, reduce stockouts, or reduce excess inventory? Once you know your goals, you can develop a plan to achieve them.

Collect data. You will need to collect data on historical sales, market trends, economic conditions, and competitive activity. This data will be used to forecast demand.

Analyze the data. Once you have collected the data, you need to analyze it to classify patterns and trends. This will help you to identify the factors that are driving demand for your products or services.

Select a forecasting method. There are a variety of forecasting methods available, such as time series analysis, causal analysis, and judgmental forecasting. Select a forecasting method that is appropriate for your products or services and the level of accuracy you require.

Generate a forecast. Once you have selected a forecasting method, you can generate a forecast of future demand. The forecast should be specific to each product or service and each time period.

Review and update the forecast regularly. The demand forecast should be reviewed and updated regularly as new information becomes available. This will help to ensure that the forecast is as accurate as possible.

Here are some additional tips for starting demand planning:

Start small. If you are new to demand planning, it is best to start with a small number of products or services. This will help you to learn the process and identify any challenges you may face.

Use a demand planning tool. There are a variety of demand planning tools available that can help you to automate the forecasting process and improve the accuracy of your forecasts.

Collaborate with your team. Demand planning is a cross-functional process, so it is important to collaborate with your team members throughout the process. This will help to ensure that everyone is aligned on the goals and objectives of demand planning.

Demand planning is an ongoing process that should be updated regularly as new information becomes available. By following the steps above, you can start demand planning and improve your ability to meet customer needs and achieve your business goals.