How to Create a Successful Demand Planning Process for Your Business

 

Demand planning is essential for any business wanting to maximize their efficiency and profitability. It is a methodology whereby you’ll be able to produce accurate predictions as to what demand levels will be for your products. It’s important for forecasting not only for your order fulfillment, but also your revenue and cash flow, as well as for maintaining your inventory and stock levels. Demand planning is a critical part of a business’s Sales and Operation (S&OP) strategy. Let’s take a look at some important components that go into a demand planning process.

Demand Planning is All About Anticipating

It’s a fairly simple concept, but it requires skill and diligence to execute properly. Demand planning is all about anticipating what products your customers will want, how much of it they’ll want, and when they’ll want it. Good demand planning also anticipates unforeseen changes and the ability to adapt to them with the least amount of disruption to both your customers and your operations. There are some basic elemental steps that should go into the creation of a solid demand planning strategy:

Make use of past sales data. The past is usually a decent indicator of what will happen in the future. Specifically, past sales data, even if at a lower level when your organization may have been smaller, can identify deviations such as seasonal fluctuations, etc. Working these into your demand plan is an excellent first step.

Engage with the customer. They are likely your best source for understanding how much product you’ll need, and when you’ll need to have it. This information in turn can be communicated to not only your internal team, but also to your suppliers. Everyone is reading off the same game plan. The alternative is to guess your customer needs - seldom a sound planning strategy.

Forecasts should be combined. It’s likely that different departments in your organization focus on different tasks, and therefore use forecasting analysis for their own needs. As part of an effective overall demand planning strategy, these predictions and the data used to arrive at them should be combined, to create a consensus strategy. Once again, everyone will be reading off the same page.

Review all the data. Once you’ve come to a conclusion as to where the future lies in your customer demand, you and your team should take the time to re-examine all the data and inputs that went into creating the plan. This will allow all stakeholders to make any final changes, or identify any overlooked issues which could impact outcomes. It also allows the whole team to reconfirm what each individual department or process will need to execute the plan properly and effectively.

These four steps can form the core of an effective demand planning methodology for just about any business operation. The end in mind is to balance supply and demand. By finding the optimal mix throughout the entire chain of inputs and outputs, your organization’s processes can be streamlined, while all members of your management team are kept in the loop, and encouraged to provide their input.

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