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Estimating future demand is one of the most valuable activities your organization can undertake. A demand plan’s impact is felt throughout the business, from sales and marketing to manufacturing and distribution.
When done correctly, demand planning can put you in an excellent position to deliver outstanding customer service while meeting your financial goals. Read on to learn more about how demand planning can improve the accuracy of your production process, and how technology can help you plan more effectively.
Demand planning is the practice of creating forecasts that predict the future need for your products. This demand might be external—in the form of customer orders or projections from marketing—or internal—such as the need for raw materials or components needed to create products. Individuals who are responsible for demand planning gather information from the sales and marketing, operations, and finance departments to estimate how much of a company’s products customers will want to buy at various points in the future. They then create a demand plan to influence supply planning. For instance, if a demand planner spots a future need for a certain type of raw material, you can use this data point to plan to increase your hands-on supply of the product.
Effective demand planning allows companies to be more proactive and puts them in a better position to avoid last minute, costly surprises. Improved demand planning provides countless benefits including:
Failing to adopt an automated statistical forecasting and planning approach can cause serious problems, which can result in a wide range of issues including missed deadlines, disgruntled customers, and the need for expedited shipping. These issues drive up operating costs. Poor demand planning can also create too much inventory, which can lead to waste. Additional, less obvious costs include:
Because of the hazards created by poor demand planning, businesses are increasingly adopting sophisticated demand planning strategies that leverage data rather than relying on gut instinct. Companies that continue to leverage spreadsheets or ill-fitting planning tools may fall short in developing up-to-date, actionable forecasts.
In the 20th century, companies used common supply-oriented, “push” strategies when managing their production process. This process was less about customer need and more about stocking shelves. Companies were merely creating inventory, versus producing inventory according to anticipated demand.
Today’s market emphasizes a more demand-focused, “pull” approach. This strategy is collaborative and data-driven. Supply chain operations are now able to produce and deliver products that are based on consensus-based plans. This new model ensures higher levels of service and operational efficiency, along with lower costs.
To keep up with rising customer expectations, supply chain teams are adopting purpose-built demand planning software that enable companies to process large data sets, spanning multiple years, using very sophisticated algorithms…a level of data processing that no human can accomplish using spreadsheets. Some of the major benefits of this technology include:
When businesses incorporate demand planning technology in their daily operations, they provide their employees with a collaborative forecasting system that is accessible to individuals in all areas across the organization.
When you implement demand planning it’s important to take a few critical steps to ensure success:
You now know what can happen without an accurate demand forecast. If you do not use proper demand planning techniques, you risk sacrificing production accuracy and falling behind in completing orders. But you may be wondering if a new approach to demand planning can really solve your problems.
When ASK Power, a top manufacturer of electrical power connectors, found themselves unable to provide a high level of service to the company’s top 100 customers without stocking excessive amount of inventory—they wondered the same thing.
The solution helped ASK Power boost on-time delivery to 99% by enabling the company to collect sales and order data from its ERP system and develop forecasts tailored to each individual business segment. With DemandCaster, ASK Power reviews available capacity, inventory, and scheduling, and then sets inventory targets and supply plans accordingly.
Curious? Learn more about ASK Power and other DemandCaster customers reaping the rewards of advanced demand planning technology today. Then check out DemandCaster’s demand planning capabilities that are part of the supply chain planning suite.