5 Key Steps for a successful Demand Planning of your business
Planning is an essential part of any business. That is why in this article today, we will be discussing one such very important part of planning for your business - Demand Planning.
We’ll get to know why it is so important for you and what are those 5 key steps that will give you the best and most effective Demand Planning.
But first things first - what is Demand Planning anyway, you might ask!
What is Demand Planning?
Demand Planning refers to the process of analyzing past demand patterns as well as the forecasts so that reliable demand for the different products can be predicted throughout the supply chain.
Demand Planning also requires analyzing consumer trends, and seasonality data to optimize the ability of your business to meet your customer’s demand in the most efficient way possible.
Why is Demand Planning important for your business?
Efficient Demand Planning can be helpful for your business in the following ways:
It has the power to mobilize and anchor company resources to act on an agreed-upon plan for products and/or services.
It filters through the entire organization to determine production plans, purchases, inventory deployment, capacity needs, and – most importantly – the company’s ability to meet and fulfill their customer’s orders.
Demand Planning delivers both profits as well as customer satisfaction by helping businesses strike the right balance between sufficient inventory levels and customer demand.
5 Key Steps for an Effective Demand Planning Process
Demand Planning is a multi-step process that involves key tasks that get complicated as the size and scope of the business or its forecasting efforts grows. We have carried out our extensive research and have come up with 5 such steps, following which will ensure that your business has an effective demand planning procedure.
1. Build your Team
You need to make sure that members of your cross-functional demand planning team have clear roles and responsibilities.
Take for instance, representatives from purchasing and supply chain groups may be responsible for ensuring that the business acquires enough inventory, that too at the right time, so that demand forecasts can be met.
It is generally the finance team that is responsible for building the actual forecast.
2. Define and aggregate relevant internal data
The various employees involved in demand planning should define and aggregate relevant internal data to develop an accurate forecast. Although this data varies from business to business, the common inclusions are - sales data, lead times, production times, inventory turnover, out-of-stock rates, obsolete inventory and other key metrics.
Check with your sales and marketing teams about changes in price, marketing campaigns and promotions that could affect demand. Gather information from product teams about new launches, retirements and competitive offerings, as these could impact forecast accuracy.
3. Use Past Sales Data
You need to use your past sales data to create a statistical forecast. This information helps you get an insight into past demand patterns and allows your business to better understand its own demand fluctuations. Now since this is from a historical perspective, it will inform its future forecasts in a much better way.
4. Interact with your Customers
Work with your customers to determine when they anticipate greater demand and by how much. Historical data alone isn’t enough to predict future trends; therefore it’s important to collaborate with manufacturers, distributors, and customers to get a clearer picture of your demand vs. supply. You can then use that information to factor into your planning process.
5. Measure your results
Last but not the least, you’ll have to identify key performance indicators (KPIs) that enable you to measure the effectiveness of your demand planning and also set targets for each. Make sure to continually review performance against your KPIs and make adjustments as necessary.
The Closing Lines
So these were the 5 Key Steps that you require for effective Demand Planning for your business. Do all of these things seem confusing to you? No worries, we heard you! And that is why we are here to help. We, at originscale, are here to automate the entire process of Demand Planning for your business so that you can pay attention to the more important aspects.
So join along, let originscale help you!