What is demand planning?
Demand planning is an invaluable tool in supply chain management, allowing a business to tailor its output to what’s most profitable.
Forecasting the need for a product or service is central to demand planning. It involves analysing past trends to predict future demand and answering questions like:
What are your competitors doing, and how does that affect the demand for your product?
Are customer preferences changing? What are their needs and wants?
What’s happening in the market? Are there any new developments that could affect demand for your product or service?
Is there any seasonality in demand? What can you do to meet demand during peak times?
The benefits of demand planning
Enhances customer service
Building trust and customer loyalty is essential to any business’ success. By understanding customer demand, you can give customers what they need with accuracy and speed. This improves customer satisfaction, which in turn helps to boost profits.
Improves inventory management
Manage inventory and accurately anticipate stock level requirements by forecasting demand.
Improving inventory management helps you determine what’s available and its value, which you must account for. It also helps you save money and maximise sales by avoiding overstocks or stock-outs.
Increases cost efficiency
Optimising inventory levels and cutting unnecessary processes can reduce operating costs, which can help to ensure competitive pricing for customers and improve margins.
Supports decision-making and long-term planning
Accurate demand forecasts can help you make more informed decisions. You can plan for long-term investments or allocate resources more effectively based on real-time data and market conditions.
Demand planning vs. forecasting
The main difference between demand planning and forecasting is that demand planning takes a holistic view of the market. A demand planner looks at the wider context, such as customer preferences and competitor behaviour, while a forecaster predicts demand over a particular period.
Demand forecasting, a critical component of the demand planning process, involves analysing external and internal data to forecast sales. Predictions usually span 18 to 24 months, depending on the product and industry.
For example, forecasting for a clothing retailer might involve looking at sales data from previous years, trends in customer spending and weather patterns to determine how much stock they need for the upcoming season.
Demand planning best practices
Set realistic goals and milestones
Setting realistic goals helps you develop a clear action plan and measure your progress.
It also helps you:
be accountable
identify what’s working and what needs improvement
track performance and make data-driven decisions.
Rather than setting a goal to increase demand for an entire product line, consider setting more specific goals. For example, you could focus on increasing demand for an item by 10% each month.
Analyse data
When creating demand forecasts, look at data from various sources, such as competitor intelligence and customer surveys.
Regularly review and adjust forecasting methods
Review forecasting methods monthly or at least quarterly to determine whether they’re still relevant.
Consider how changing consumer preferences, market trends and new technologies might affect demand for your product or service.
Use software for demand planning
Specialised software can help businesses create more accurate forecasts and quickly respond to changes in demand.
The MYOB business management platform is ideal for businesses looking to streamline demand planning processes.
It can:
streamline manual tasks, freeing time to focus on more strategic activities
track stock and automatically re-order to maintain inventory levels
provide a complete view of your business that helps you make informed decisions.
How to find the right software for demand planning
1. Consider the size and complexity of your business when selecting a platform
There are demand planning software solutions for businesses of all sizes and industries. Choose a platform that suits your business’ current and evolving needs.
Consider whether the software tracks:
customer data to help you identify trends in buying habits
inventory levels to ensure you have enough stock on hand
sales trends that will help you make accurate demand forecasts.
Remember to think up to 5 years ahead. Consider scalability, potential growth and what integrations you may require.
2. Consider ROI
Determine what features will give you the most value for the price.
Make sure the software has all the features you need — and don’t spend money on features you won’t use. A must-have list can help you narrow down your options.
Look into features like:
Data security: Find software with encryption and other security protocols to protect your data.
Integration: Make sure it integrates with other applications your business uses.
Mobile access: Check if you can access your data from any device.
Real-time data: Choose a platform that provides insights in real time and allows you to adjust to changes in demand.
Reporting tools: Find a platform with custom reports and dashboards to help you get the insights you’re looking for.
3. Check customer reviews
Read customer reviews to learn how satisfied other users are with the software and if it’ll fit your needs.
Check out the company’s website and third-party review sites.
4. Ensure the system is user-friendly
Look for software that’s easy to use and understand, so everyone in your company can get the most out of the system and use it to its full potential.
5. Make sure the software is future-ready
Look for a platform that allows you to only pay for what you need today and scale your platform as your needs change tomorrow.
6. Sign up for a free trial
Test the software with a free trial to see if it meets your expectations and is easy for staff to use.
Optimise your supply chain with MYOB
MYOB is a business management platform that allows you to connect your business workflows across customers, suppliers, projects, employees, finance, accounting and tax so that you can drive efficiencies and get real insights into business performance.
Having a complete view of the business helps you with demand planning and supply chain management so you can consistently deliver a superior customer experience.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.