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What is Demand Planning?

Demand planning has become one of the most important parts of supply chain management. Modern demand planning software has made this practice more effective and convenient than ever, and businesses with large supply chains look at demand planning as an absolute necessity.

Demand planning can improve the supply chain - 3983989383
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However, it can be difficult for the layman to understand exactly what demand planning is. This article will cover the aspects of demand planning, its importance, and some best practices. Read on to learn more about demand planning.

The Aspects of Demand Planning

Managing Your Product Portfolio

One of the most important aspects of demand planning is managing your business’ product portfolio. This involves overseeing the entire life cycle of a product, all the way from its introduction to when it is discontinued.

This can be very difficult to do when your business has a large portfolio of products. In these cases, it is inevitable that some of your products (if not all of them) are interdependent. Introducing a new product, for example, could affect the demand for your existing products. Demand planning will help your business understand what the right product mix is to maximize profits.

Statistical Forecasting

Statistical forecasting is another important aspect of demand planning. This process uses data from past operations to come up with detailed forecasts for the future. Demand planning software can do this accurately by using complicated algorithms that would be nearly impossible to use manually.

It is important that businesses that use statistical forecasting see where their algorithms fail, so they can adjust their forecasts in the future. Statistical forecasting is especially useful when trying to predict seasonal consumer behavior.

Trade Promotion Management

The retail industry can be strongly affected by trade promotion and marketing events. While promotions and marketing events are carefully targeted to increase demand for a certain product, consumers sometimes react in unexpected ways. Effective demand planning can keep retailers from getting caught off-guard.

The Importance of Demand Planning

Demand planning allows businesses to more effectively manage their inventory and optimize their logistics. They can predict what product consumers will want and get their products where they need to go on time. Demand planning also helps businesses avoid over-producing a certain item.

Demand Planning Best Practices

There are four vital best practices that businesses must follow when using demand planning techniques. They need to implement the right software, gather and prepare data effectively, define their process models accurately, and implement and monitor their forecasts properly. Following these best practices will ensure that a business can effectively use demand planning to make their business more efficient.

Implementing the right software is the first and perhaps most important best practice when a business decides to start demand planning. There are several solutions on the market, each with slightly different features.

It is best for your company to do extensive research when looking for the right software, as it can be the difference between making a profit or losing money in the long run. In general, you want to find software with the greatest variety of reporting capabilities possible.


Interesting related article: “What are Market Forces?