How Does Demand Planning Work?

How Does Demand Planning Work?

When it comes to estimating future demand, it’s important to carefully assess all relevant factors. In fact, estimating future demand is a process that should be considered nearly sacred to a brand. By correctly estimating what future demand of a product or service will be, it then becomes possible to accurately and adequately distribute the necessary resources to meet future demand requirements. Keep reading to learn more about demand planning and how you can use it to meet all of your future demand needs. 

What is Demand Planning?

A company that practices demand planning is one that partakes in the process of developing forecasts that align with customers’ future demands. Much of the time, the demand is external, meaning it stems directly from customer orders as well as those made by the projections of marketing processes. Internal demands are those that derive from the need for raw materials (it can also come in the form of needing certain components to ensure the production of creating specific products). 

How Does Demand Planning Take Place?

Those responsible for demand planning tend to spend their time gathering information from those directly involved in sales and marketing operations as well as those in charge of the finance department. This is to ensure that accurate estimates can be created to pinpoint the customers who are most likely to buy now along with those who will buy at various points in the future. 

The demand plan itself, however, is created to influence supply planning. Take for example that a demand planner pinpoints a future need for a specific raw material; this creates a data point. You can then take the information from the data point to ensure the hands-on supply of that specific raw material is adequate during the exact timeframe that the product is needed. 

When demand planning is performed effectively, it allows companies to take a more proactive approach to avoid last-minute scuffles when meeting customer demands. More importantly, it allows companies to avoid costly surprises that can sometimes arise when trying to meet the demands of customers. 

Benefits of Demand Planning

Some of the most notable advantages and benefits of proper demand planning include:

  • Reduction in stockouts
  • Increases on-time and in-full distributions
  • Lower costs of inventory
  • Better opportunities for negotiations among all involved parties
  • Reduce wastes
  • Reduce shipping feeds

What Happens Without Demand Planning?

When a company doesn’t partake in demand planning, also known as demand forecasting, it is much less likely to meet the future needs of its customers. By not meeting future customer needs, the result can be poor customer satisfaction levels. And as any professional marketing specialist will agree, having poor customer satisfaction levels is one of the worst mistakes a brand can make. 

If your company is searching for a way to better meet the current and future needs of its customers, it’s pertinent to create a demand planning process now. When you can accurately predict the future needs of customers, it then becomes much easier to properly distribute your resources to meet those demands.