Robotic Process Automation
The right processes to drive your demand planning
Demand planning is a critical aspect of supply chain management through which a business can align the availability of its products and services with anticipated customer demand. By implementing effective demand planning, enterprises can optimise their inventory management and minimise supply chain disruptions. This is achieved by ensuring that the required products are available in the appropriate quantities at the right time, thereby avoiding excess inventory or stockouts. When done correctly, demand planning can boost revenues while minimising overhead costs. It also helps businesses enhance customer satisfaction and thus retain their customer base and foster long-term customer relationships.
Demand planning involves predicting future customer demands based on many factors. These include real-time and historical sales data, competition, seasonality, and geopolitical and socioeconomic situations. It is a cross-functional process involving sales and marketing, purchase, supply chain, operations, finance, and production. The demand planning process starts with gathering, interpreting, and analysing the correct data to make accurate predictions for future demand. The people involved in the process must know the pulse of the customers and understand all macro and micro market trends. A good demand planning process indicates that an organisation is proactive rather than reactive with regard to market trends. And this difference is essential to gain and maintain a competitive edge to sustain the business.
Here are four steps that streamline the demand planning process and ensure its accuracy.
Establish and maintain a process roadmap
Create a structured, documented roadmap for the demand planning process with clear guidelines, tasks, task owners, deadlines, goals and other relevant parameters. Remember that various dynamic factors can impact demand planning. Hence, make the process adaptable, monitor it continuously, and make changes as needed. The process must reflect both short-term and long-term business priorities and be linked to quantifiable goals. Ideally, to ensure accountability, it is best if one designated person can own this process roadmap. However, it is essential to involve key stakeholders, such as CEO, CFO, CPO, etc., and get a buy-in to drive this right. Without the management’s support, the demand planning process will not deliver desired results.
Foster cross-functional collaboration
The demand planning process requires information gathering across various departments that perform distinct functions. Hence, it is critical to establish seamless, cross-functional communication and collaboration. There are chances of conflicts arising because of people working in silos. Create awareness about the need to get demand planning right through training and resolve issues through open discussions. Share organisational goals, and discuss challenges that hamper the gathering and sharing of information. Identify measurable goals and benefits department-wise while collectively sharing the success. Correlate the success of the demand planning to its accuracy and map it to profitability and customer satisfaction to drive the message home.
Identify and implement required tools
For improved accuracy, it is best if organisations use credible tools to gather and share data. Lack of tool availability may be a critical challenge for some departments and could hamper their effective contribution to data sharing. Often organisations do not invest in data-gathering tools for functions like sales and fulfilment services and instead rely on spreadsheets populated manually. This method can be error-prone and, being people-dependent, come up short on efficiency. The right way to go about it is to implement statistical forecasting tools that can automatically collect, interpret and analyse the data from various departments and share it with required stakeholders as required. With advances in AI and ML, many demand planning tools that easily integrate with existing supply chain management solutions are available. Many are customisable, have intuitive UIs, and deliver quantifiable results to measure ROI.
Set and measure the Key Performance Indicators (KPIs)
Measurement against set objectives is imperative to gauge the success of the demand planning process. Therefore, stakeholders must define clear KPIs that are easily measurable and suit business needs. It is also essential to review these KPIs and change them periodically to reflect changing trends. Some commonly tracked demand planning KPIs are inventory turnover ratio, order lead times, forecasted versus actual sales, etc. These KPIs are dependent on the business sector, organisation size, business goals, etc., and may vary for each organisation. Since the KPIs may span various functions, use the right tools in each function to ensure accuracy. For example, sales process management solutions in the sales function and so on. Publish the KPI results across the organisation to foster awareness, and create a sense of pride and ownership. Develop demand planning as a critical role contributing to the organisation’s profitability, motivating people across various functions to participate. By sharing the results periodically across the organisation, everyone appreciates its significance.
The success of demand planning depends on getting these key processes right. Even minor variations in the data, analysis, and subsequent predictions can impact profitability significantly. The right processes can drive demand planning in the correct direction and help achieve the desired business goals. Therefore, it is imperative that demand planning becomes a focussed, systematic process that aids effective supply chain management to improve business efficiency.
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