Demand planning is a crucial process within supply chain functions, which allows businesses to predict the demand for products or services and manage their operations and supply chain accordingly.
Effective demand planning allows organisations to better manage stock levels, resources and personnel to ensure that they are able to fulfil sales quickly, but without having surplus stock sitting in warehouses, teams of people on contract without enough work to occupy them or manufacturing capability under utilised.
We regularly work with clients to help them find the best strategy for demand management based on their specific needs, and then support them as they implement that strategy. No matter what strategy you're using, there are some common demand planning best practices that you can follow to increase effectiveness.
1. Buy in across the business
Demand planning has an impact across multiple areas of the business, including supply chain and procurement, finance, sales and marketing, operations, and manufacturing. It's important, no matter what strategy a business is using, to get buy in from all the relevant departments.
This buy in makes it easier to gather accurate data from across the whole organisation to feed into the strategy and helps to ensure all functions are working together to deliver the best results for the business.
2. Accurate internal data
Any new strategy should be developed using data to ensure the best outcome for the business. It's important to ensure that the data used is up to date and accurate, particularly when looking at things such as inventory levels, sales history, and average delivery times.
This data can highlight areas for improvement or where elements have worked well in the past, and can also be used to carry out a gap analysis or in scenario modelling to help inform your new strategy.
3. Utilise external data
There are a huge number of external factors that can impact a business's ability to deliver, such as global supply chain disruptions, geo-political issues, and natural disasters. It's also a good idea to review market shifts and changes in consumer behaviour that could have an impact on demand.
Combining these insights with internal data should give a good picture of what the market could look like going forward and allows businesses to plan based on this, and put plans in place for different likely scenarios.
4. Monitor and revise
Once the process of demand planning has been completed and any actionable insights have been implemented, it's time to ensure monitoring is up to scratch. Businesses can monitor data against different KPIs, for example sales forecast accuracy, inventory turns, fill rates and order fulfilment lead times. Not only should this data give an idea if the demand planning process has had a positive effect, but regularly reviewing this data can indicate there may still be issues to iron out with further demand planning.
As well as regularly monitoring the data, it's a good idea to periodically repeat the demand planning process, to ensure it's up to date and considers current market trends.
Originally published 23rd September 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.