How to elevate the demand planning process for business success?

Demand planning is an essential part of supply chain planning. It is a method of forecasting demand for a service or product so that organisations can anticipate future needs and be ready to fulfil them. Demand planning involves the creation of a demand plan that is driven by elements such as marketing, and inventory. and distribution points. The demand plan drives the materials requirements planning (MRP) and production planning, which are the next steps in supply chain planning. For complete success, the demand planning process must be a continuous one and involve everyone associated with the product or service. It can become an organisation’s competitive advantage if deployed with the appropriate objectives, processes, metrics, talent and technology.

The various steps that ideally define a demand planning process include:

  1. Generation of a baseline system forecast using statistical models or machine learning (ML) algorithms. Future demand is predicted by analysing historical data.
  2. Understanding demand drivers and using micro and macro inputs to gain insights into customer behaviour.
  3. Gathering inputs from all the stakeholders of the product or service, including customers where applicable, on product quality, prices, business deals and margins.  
  4. Generation of a demand plan by using all the data collected from different sources.
  5. Obtaining and incorporating inputs from organisational leaders and then publicising the demand plan across the organisation for consensus from concerned departments.   

What ails the supply chain landscape?

Perhaps one of the primary issues plaguing the modern supply chain is the inability of organisations to anticipate demand in real time and then adjust the supply chain. This can, and has, led to delays and no-stock scenarios. Unforeseen bottlenecks and delivery backlogs lead to a drop in warehouse capacities, labour pools and other logistical issues. The global supply chain has undeniably been somewhat optimised but there is clearly a lot of room for improvement.

Ways to boost demand planning

Organisations must focus on improving their demand planning in order to boost agility and to be able to respond to market changes with ease.

  1. Build a process based on open communication: A well-defined process ensures that all decisions are based on real data, not guesswork. It also helps to keep all the stakeholders apprised of the status. In many organisations, demand planning is the responsibility of analysts and planners working in a silo. This is a sure path to failure since the plan is backed by narrow views, negligible feedback and overall, insufficient data. For success, organisations must ensure that planning teams comprise representatives from all departments and there is regular communication between all the teams. A culture of openness and transparency encourages team members to share ideas, insights and opinions.  
  2. Analyse historical data: Data from past sales and market demand need to be collected and analysed to gain critical insights into existing and future trends in demand. Customer behaviour can be better understood by using predictive analytic tools on data. Industry shifts that can affect supply chain operations can be better anticipated too.
  3. Ensure data quality is high: Accurate demand planning requires analysis of high-quality data so organisations must invest in tools and technologies that enhance data quality. They must implement sturdy data management processes to ensure the data is clean and not duplicated and also establish and practise data governance policies at all stages of the process.
  4. Implement advanced analytics and AI-powered tools: These tools can quickly work with large amounts of data and help organisations understand demand patterns so that future forecasts can be more accurate. Team members should be provided with the right training, if needed, to use advanced tools. Data-driven insights can show organisations how to adjust their production and marketing strategies.
  5. Track market changes: Tracking changes in the market is critical for staying ahead. Competitors’ prices and strategies, including any new products or services being introduced to the industry, must be monitored. Customer preferences and any other external factor must be monitored to stay informed and be ready to meet demand. 
  6. Add flexibility: Agility and adaptability are key qualities of demand planning. Contingency plans must be developed to be ready for potential disruptions. A responsive supply chain should be able to adjust quickly to changed production and inventory levels.    
  7. Test scenarios: Unforeseen problems, and strategies to solve them, can be identified by testing different scenarios. This technique can also help identify potential risks or hurdles associated with certain approaches. All in all, it helps organisations stay prepared.

Why is demand planning a necessity?

  1. Higher accuracy: Demand planning enables organisations to work with real, accurate and current data, which in turn helps make more informed decisions about the complete supply chain.
  2. Lower risks: With accurate information about demands and requirements, organisations run a lower risk of both underproduction and overproduction. The natural outcome of this is lower costs and higher customer satisfaction.
  3. Higher efficiency: By leveraging advanced analytic tools, organisations can gain insights quickly and make changes as needed in response to market conditions.
  4. Scalability: The ability to scale up or down because of the use of automated processes creates an agile environment without having to modify staff or equipment.
  5. Higher visibility: Demand planning allows organisations to ensure that the right products are stocked at the right time since there is greater visibility into inventory positioning across all locations and channels involved with the product or service. 

The benefits of demand planning are many but so far, it has been a rather under-leveraged business process. Doing it right, however, is essential for achieving business goals and maximising shareholder value. Efficient demand planning enables better business outcomes, enhanced working capabilities and efficient resource deployment.

* For organizations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organizational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organizations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organizations that are innovating collaboratively for the future.

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