Demand planning in supply chain management allows businesses and companies to predict the demand for the product or service for efficient production and distribution to satisfy the needs of customers on time. In fact, it plays a key role in the process of SCM. Today, we’ll discuss demand planning in supply chain management; its key elements, best strategies, steps involved in the process, benefits, and examples.
SCM comprises two main components; SC planning and SC implementation. Demand planning is the main area and initiates SCM processes, and it comprises of following;
- Establishing demand planning
- Statistical forecasting
- Analyzing those factors that would impact demand like marketing and inventory
- Allocating product distribution to meet the expected demand
The demand planning helps the SC planning in two ways;
- Production planning
- Material requirement planning
After the production of the products and goods, it reaches the execution phase of SCM;
- Warehouse management
- Transportation management
The demand planning team comprises of following members;
- Demand planning analyst (specific role in some companies)
- Demand planner
- Production manager
- Finance manager
- Manufacturing staff
- Sales managers
Key Elements of Demand Planning in SCM
Some of the key elements of demand planning in supply chain management are as follows;
Gathering Data & Modeling
As the name implies, it comprises collecting data from both internal and external sources in the context of demand.
Here, you employ various statistical methods and tools for demand forecasting and predict demand based on capacity planning data, inventory management, and sales.
Managing Product Portfolio
Managing a product portfolio involves dealing with various product lines at the same time in order to achieve strategic benefits and cost efficiency.
TPM (trade promotion management)
Trade promotion management comprises employing various strategies and methods to amplify customer demand.
You should insert your collected data in the analytical and other intelligence tools and software in order to predict the demand and conduct other analyses.
As the name implies, it comprises collaborating and collecting data from salesforce, manufacturers, suppliers, marketers, and various other stakeholders of the company that would impact the demand.
Strategies for Demand Planning in SCM
Some of the top strategies and practices for demand planning in supply chain management are as follows;
Establishing Demand Planning Objectives
Setting goals and objectives would allow the demand planning team to streamline the entire demand planning process. Demand goals would help you to avoid overstocking, stock becoming low, or any other type of issue or mishap. If you know what to do and what to avoid, it allows you to develop a strategy that helps you to achieve your goals and objectives.
Developing Data Process Model
If you have got a data process model, it would allow you to develop a comprehensive plan. You should analyze the demand planning process and recognize the significant steps and implement it in your business. First, you should predict the demand based on the internal data, and then employ the external data.
Getting Ready for Holiday Season
The demand is very high during the holiday season like Christmas, Black Friday, Halloween, Happy Thanksgiving, and others. It is difficult for retailers to predict the exact demand based on seasonal supply chain delays across the world. The cross-border shipments become delayed due to the shortage of labor. In order to deal with such issues, it is significant that you should place orders in advance and maintain sufficient stock in the inventory safely to avoid last-minute delays.
Accurate Data Inventory
False and outdated data would make you make the wrong decision about inventory management. False data usually comes from the wrong and unreliable sources and confused presentation. It would have a negative impact on the demand prediction of the inventory.
Employing Right Tools
While gathering data and planning the demand of the SCM, it is significant that you should employ the right tools and software. Or you should employ the right inventory management system along with the software, it would help you to analyze your product performance and predict demand.
Steps of Demand Planning in SCM
Some of the key steps involved in demand planning in a supply chain management system are as follows;
Gathering Your Team
You should create your demand planning team from various departments of the company and clearly define their roles and responsibilities.
Outlining Internal Data
You should collect all the data relevant to demand forecasting like lead time, inventory turnover, and sales data; find a pattern and connection among all of them.
Including External Data
After the internal data collection, you should gather quantitative and qualitative data from various external sources like consultants, suppliers, and customers.
Selecting Demand Planning Strategy
You should select the right demand planning strategy relevant to the needs and requirements of your business. You can employ various practices and methods to refine the whole process.
Employing Demand Planning Software
Demand planning is a critical process, it is significant that you should employ various tools and software to streamline various demand planning activities.
You should coordinate with your team members and decide what type of demand forecasting model is relevant to your company.
Refining and Reviewing
You should present your demand predictions before all the stakeholders for review and evaluation; include their feedback and check whether it still works.
It is significant to know the level and capacity of your inventory in order to meet the demand prediction.
You should employ various KPIs (key performance indicators) to analyze the effectiveness of your demand and make adjustments to your plan.
Benefits of Demand Planning in SCM
Some of the key benefits of demand planning in supply chain management are as follows;
- Lowers the cost and allocates budget for other purposes
- Organize the company’s staff and employees in an efficient way
- Efficient utilization of the warehouse space rather than filling it with unnecessary stock
- Won’t have outdated stock or decrease significantly because you would keep in the inventory what is relevant
- Maintaining a significant level of safety stock in hand to meet the market demands
- Producing the right numbers of products that would be sold easily
- Planning optimal stock at the right time
Example of Demand Planning in SCM
Toy Manufacturing Company
The toy industry is a seasonal business and its sales are very high during particular times of the year like summer, thanksgiving, Christmas, and others. They need to organize the right production processes and place the orders on time to avoid delays. However, marking the calendar and forecasting demand is not enough; companies should analyze sales over a specific period of time.
Conclusion: Demand Planning in Supply Chain Management
After an in-depth study of demand planning in supply chain management; we have realized that demand planning is highly significant for the SCM processes. If you are learning about demand planning in SCM, then you should keep in mind the above mentioned key elements, benefits, and process steps.
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