What is Demand Planning in Sales?


Demand planning and forecasting are critical to the success of any manufacturing company. It’s critical to know how much you’ll need to stock up on. Manufacturers, such as the folks at Coffee People, frequently utilize this process to ensure that their stores are full but not overflowing. You must master the demand in order to plan it.

This type of control necessitates the visibility of actual demand, the decrease of lead times, and the ability to deliver client orders in accordance with quantities, quality, and due dates.

We thought that the first question to answer should be: 

  • What is demand planning?
  • Significance of demand planning
  • Know what demand planning is and how forecasting fits into 
  • Elements of demand planning
  • Process of demand planning
  • Suggestions for improving demand planning

What is Demand Planning?

Demand planning is a cross-functional process that assists organizations in meeting product demand while limiting excess inventory and preventing supply chain interruptions. It has the potential to enhance profitability, customer happiness, and efficiency. The process should be an ongoing, entrenched activity in your company. Fortunately, technological advancements have made this possible, though not simple.

The two primary components of supply chain management are supply chain execution and supply chain planning. The planning side of SCM typically begins with demand planning, which entails developing a demand plan based on a statistical forecast that takes into account what can influence demand, such as inventory and marketing, and specifies where products should be distributed to meet anticipated demand. The demand plan informs the following phases in the supply chain planning process, which are material requirements planning (MRP) and production planning. After the product is created, it moves into the SCM execution stages, which include warehousing and transportation management.

Demand Planning Team

A demand planning team’s usual members include sales managers, marketers, and manufacturing, finance, and production managers. Some businesses have specialized personnel with names such as demand planners and analysts. The team is generally led by the demand planner.

Looking at the data and then, with a splash of intuition, attempting to predict how much of each product will be needed in a specified time. If you manage to execute it correctly, the benefits are obvious:

  • Optimize inventory levels by conserving resources and releasing assets held in safety stock.
  • Increasing earnings by creating only what you want to sell;
  • Forecast future income — using precise demand forecasting.

The ways to accomplish this are many, but there are a few essential aspects that are critical to the success of your process

Significance of Demand Planning

Keeping up with demand for a product is important since failure to do so can result in lost income or, worse, losing consumers. One of the primary aims of demand planning is to have precisely the appropriate quantity of inventory to fulfill customer demand without running out of inventory or spending money on creating and keeping excess inventory.

Know What Demand Planning is and How Forecasting Fits into it

Demand planning is described as “estimating demand for various goods at various stages in the supply chain using predictions and experience.” In general, who is accountable for predictions, what are our goods, where are they in their product lifecycle, what is their demand pattern, do we understand the variability/volatility in the market, and who is supplying the extra information necessary to make an acceptable forecast?

Of course, depending on the firm, there may be extra questions that must be addressed. For example, a business continually overestimates demand for multiple big product lines, resulting in higher inventories and poorer inventory turns. While the firm may or may not consider this an issue, the demand planning process may help in understanding what inventory objectives should be and why, as well as what an acceptable projection should be, through continuing analysis and forecast track.

Understand the Relationship Between Demand Planning and Forecasting and Sales and Operations

Demand forecasting and planning are not stand-alone activities. In order to create value, they must be incorporated with other parts of the business. S&OP is one of these procedures. S&OP is defined as “a method that integrates demand, supply, and financial planning into a single business game plan.” It also connects strategic objectives to operational plans and strives to create the most attractive product portfolio and product mix in order to optimize sales and profit.”

Elements of Demand Planning

Demand planning is a complicated process that usually involves the following components:

Data collection from internal and external sources on elements known to foretell or impact demand; statistical analysis of sales, inventories, and other data; data modeling to anticipate future demand and coordination with suppliers, manufacturers, salespeople, and other stakeholders to obtain information on events that may have an impact on demand, including promotions and manufacturing delays.

The above steps result in the following:

Demand forecasting is a prediction of demand based on the data model and analysis, followed by demand planning, which specifies the amount, type, and location of inventory required to meet the expected demand.

Aside from these fundamental functions, several demand planning techniques include, at least in part, the following processes:

Product lifecycle management (PLM) is used to evaluate the factors that influence demand for various products, and replenishment planning is used to ensure that inventory is in the correct location and in sufficient numbers to fulfill demand.

Process of Demand Planning

Getting the demand planning process down part takes time. It will require practice and fine adjustment. When you make projections, go back and see how you performed with them after the fact. It’s the only way to truly enhance your technique. So, now that you have the data, what is demand planning?

It’s time to put the crystal ball down and take a deep breath. Look for patterns that can foretell the future of your firm and, if you’re lucky, maybe your own too. Demand planning is the act of organizing and interpreting your demand projections in the context of your company’s context.

There are numerous methods to this, and you may create your own strategy that works best for you over time. However, the first thing you should do is collect and combine all of your forecasts. You should use the most up-to-date information available to create a type of master forecast. It will not always be a single graph with a straight line running through it. This includes updating information after your initial approach if new information becomes available. It will almost certainly result in a report containing demand forecasts for each product and product category. Numbers that simply inform you what the demand is expected to be so that your inventory may be optimized.

That way, when you repeat the procedure, you can maintain a consistent technique and identify anything that isn’t functioning effectively. Because it is possible that the first time you run your strategy, it will not turn out as you planned. We’re talking about the long haul here. Every time, fine-tune your crystal ball readings until you’re predicting fortunes for your whole industry on a starry night.

Suggestions for Improving Demand Planning

Before establishing your production schedule, take the time to analyze all of your opportunities for more clarity. Here are some pointers to help you set more specific goals:

Set your own boundaries

Make sure your forecasts are organized in logical groups. Products, product groups, and the complete range make the most sense. If they become jumbled up, your process will become perplexing.

Make use of your resources

We’re not just talking about books and the internet here; we’re talking about everyone you know who has helpful ideas. Experts in the field, customers, suppliers, and even competitors.

Make your Objectives Clear

you’re gathering input, whether it’s statistics or just useful thoughts, make sure the other person understands why you’re doing it. Otherwise, their contributions may be misconstrued.

Make good use of your results

When you have your results, you should begin applying them by establishing your safety stock and reorder points. Otherwise, all that info will be useless, won’t it?

Make the Most Out of it

Starting with the stockroom, you can ensure that you are getting the most out of your demand planning and forecasts. Because improving your safety stock will be a direct outcome of your efforts. It is not simple to master the foundations of this process. If you get it correctly the first time, you should reward yourself with a medal.

Because you are one of the few, not the many. The reason it is so tough to get right is that every firm has extremely distinct demands, even with the assistance of demand planning tools. In any case, the analysis has only one component. Following demand forecasting, you must ensure that there is a considerable degree of accuracy.

Then you must ensure that your data is placed in context. As they say, getting the narrative straight. As a result, you’ll constantly need the proper tools at your disposal.

Software that provides up-to-date sales and inventory data while also allowing you to put your findings into action. Furthermore, once your demand forecasting is in place, you can utilize the data to begin establishing reorder points for your items. You will not be spending money on needless stock while ensuring that you always have enough in stock to keep your clients pleased.

Using the right sales tools and sales process will further bump up your sales.

All the best!