The importance of effective demand planning

by | Nov 19, 2024 | Data Management, Inventory Management, Order Management, Suppliers

Just as an orchestra requires each instrument to work harmoniously, effective demand planning is key to a manufacturer’s ability to produce quality products efficiently. Missing one element? Challenges will arise.

What is demand planning?

Demand planning is a process that manufacturers can implement into their supply chain to predict upcoming demand for certain products. Manufacturers use this gathered information to adjust output, balance inventory levels and ensure customers receive their products when they want them.

It involves the orchestration of all resources, schedules and workflows that are necessary for manufacturing products. Each element must operate in harmony to achieve true efficiency.

The key components of demand planning

  • Demand forecasting: Anticipate customer demand to determine the necessary materials and equipment.
  • Scheduled production runs: Coordinate labor and production timelines to ensure timely delivery of products within budget.
  • Data accuracy: Ensure data is accurate to meet constantly moving targets and remain agile in the supply chain.
  • Long-term planning: Begin planning, sometimes up to a year before sales will occur. Often, manufacturers work on a 90-day rolling calendar that accounts for regular “resets.”
  • Retailer resets: Retailers typically finalize their “reset” strategies for planogram teams several months in advance. Be ready for December before September begins.

Demand planning challenges

As with any supply chain process, there are a few challenges that can arise, including inaccurate forecasting and trouble adapting to changes.

Inaccurate forecasting: Poor demand forecasting can lead to either overproduction or stockouts, disrupting the entire supply chain.

Adapting to change: Difficulty in adjusting plans to align with real-time data and market fluctuations complicates the planning process.

Strategies to improve demand planning

As the importance of demand planning becomes more evident, many brands are taking steps to prioritize the process. There are a few strategies that manufacturers can use to improve their demand planning practices.

Data-driven decision making

Relying on accurate sell-through and sell-in data allows brands to evaluate performance across key accounts and product lines. Data accuracy is essential for building trust and guiding strategic decision-making.

Leverage market insights

Access to comprehensive market and industry data helps brands identify growth opportunities and challenges, enabling them to stay ahead of competitors.

Enhance planning and forecasting

Streamlined processes, such as item setup and demand planning, remain crucial as brands move into 2025 and beyond. Developing effective forecasting skills is vital for profitability and operational efficiency.

Optimized data integration

Close collaboration between technology and business development teams is necessary for seamless data integration across internal systems. This alignment allows for quick, informed decisions on inventory management, procurement and replenishment, driving better business outcomes and supporting brand growth.

Get started with better, strategic demand planning

Demand planning is a dynamic and complex process that requires careful orchestration and constant adaptation to succeed. By leveraging data-driven strategies, market insights and effective collaboration, manufacturers can enhance their demand planning capabilities and navigate the challenges of the ever-evolving marketplace.

To learn more about how to implement demand planning into your supply chain, discover Community for Manufacturing from SPS Commerce.

Emily Curran
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Community for Manufacturing

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