Planning is one of the most important activities of an organization. The impact of demand planning is profound across the entire business – from sales and marketing to manufacturing and distribution. If demand planning is done correctly, businesses gain a competitive edge in delivering superior customer services and reaching financial goals & objectives.
Read till the end to know more about What is demand planning and its role and how advanced analytics can improve the precision and accuracy of the demand planning process.
What is Demand planning?
Demand planning is a process that allows a company to forecast future needs, and to effectively regulate the output of the products or services that are in accordance with those expectations.
Effective demand planning allows the company to take proactive action and allowing them to be better, to avoid any last-minute surprises. and offers a lot of advantages, including the following:
- Cost reduction of Inventory
- Inventory reduction
- It can reduce the amount of waste generated (i.e., the redundant and obsolete inventories)
- The growth in today’s complex and supplies
- Ability to negotiate with vendors and suppliers a more favorable rates or terms and conditions.
Why Demand planning is vital?
Effective demand planning ensures both profitability and customer service, helping businesses to find the right balance between adequate supply and the demand of the customer. This is not an easy job to do, especially since it requires the coordination of the organization as a whole. However, the consequences for the company are very reasonable. Like in working capital, which increases the cost of moving goods, and increases the likelihood to discard the use of the product of low quality or obsolete inventory.
On the other hand, poor planning can lead to inevitable disruptions in the supply chain and may leave the company without a product, which can lead to conflicting orders. All of these issues can lead to delays, which lead to the wrath of the customers.
Does your business needs Demand planning?
The demand planning function requires co-operation and coordination among various departments, such as sales and marketing, procurement, supply chain, from design, production, and finance. In addition, top managers, who are responsible for managing the product portfolio, as well as the general strategy is to play an important role, considering its overall impact on the organization.
Since demand planning traces so many business purposes, the place of employees who handle this accountability can vary: It may be an autonomous group or it may be integrated into one of the divisions listed above, as well as the procurement or operations divisions. Few believe that demand planning is most effective when it is closely connected to the marketing and sales division.
Demand planning steps
Organizations differ in how they approach the demand planning process, but there is a common set of steps that businesses are likely to take. These steps are as follows:
- Organizing and preparing data
- The development of a preliminary forecast
- The integration of market data
- Restoring bottom-up and top-down forecast
- With the help of the analysis is to track the outcome of the project
Role of advanced analytics in demand planning
With advanced analytics in place, companies can integrate demand planning in the business process to make smart decisions and become cost & time-effective.
Less than 30% of the companies make accurate predictions about future demand; however, advanced analytics is believed to change the existing scenario and companies worldwide are trying to leverage its predictive capabilities for effective demand planning.
The proper use of data analytics, including advanced analytics, can improve the accuracy of demand forecasting by taking into account a wide range of external factors that have an impact on the client’s decisions and preferences. These factors can range from a change in macro and micro-level economic situations.