Demand planning helps businesses meet consumer demand for products. The process minimizes cases of excess inventory and avoids supply chain disruptions. The planning will increase your business profitability, efficiency, and customer satisfaction. This article analyses the steps to follow in successful demand planning.
- Creating a Team
Ensure every member of the team has clearly defined roles. For instance, you can mandate members of the supply and purchasing unit with the task of acquiring inventory at the right time to meet forecasting needs. The finance group often comes up with the full forecast.
- Defining and Aggregating Internal Data
The employees who focus on demand planning need to agree on which data to include to develop an accurate forecast. Often, the relevant data varies by company. Location and channel sales data, inventory turnover, out-of-stock rates, lead times, obsolete inventory, production times, and other metrics are essential in demand forecasting.
You can check with the marketing team to know the timing of product price changes, promotions, and marketing campaigns that can influence demand. Gather essential information on new launches and competitive/retirement offerings that affect your forecast accuracy.
- Using External Data to Enhance Forecast
External data affects the accuracy of demand forecasts. External data metrics include; recent product performance, suppliers’ delivery timelines, and new purchasing habits. External information like economic conditions may affect market shifts and sales for some products.
- Developing Statistical Demand Model
Determine as a team which forecasting model or models to use. The model should make sense according to business type. Start building the model.
Demand planning software helps in building statistical models. Small businesses can use Excel tools. Apart from the company predictions, you can create forecasts for by-products, product lines, and specific regions or customers.
- Challenging Demand Predictions
Reanalyze, refine and review the demand predictions with key company stakeholders. Include recent data to analyze its influence on forecasts. Check thoroughly to ensure all provided information is correct. Remove outliers that can distort overall predictions. Double-check to ensure demand predictions match with the company’s financial projections.
- Comparing Demand Forecasts With Inventory
The team needs to determine the amount of inventory that aligns with demand forecasts, including buffer stock. Choose necessary suppliers to meet demand and regularly check their capacity to deliver the products on time. Ensure the suppliers can handle transportation even when volumes are high and meet business schedules for transporting products between locations.
- Analyzing Results
Identify key performance indicators to measure the demand forecast or planning effectiveness. Set clear targets for all performance indicators you’re using. The targets your business can set include; accuracy of sales predictions, order fulfillment, fill rates, and costs of products sold. Review the performance continuously against the set targets and make necessary adjustments.
Demand planners require an excellent analytical skillset and are competent in data modeling and analysis. Great communicators also succeed in the field. Your business can draw the benefits of demand planning, ranging from meeting customer demand, increasing profits, and avoiding cases of running out of inventory.
Set the right team to conduct demand forecasting to get the desired results.