Demand Planning: How to Meet Future Needs Using Old Data

To be successful, companies have to be efficient. 

It’s advantageous to create a large number of products and services to prepare for customer demand ahead of time. But when time isn’t on your side, companies must be able to adapt at any given moment. 

There is no advantage when supply is sitting in a warehouse because customer demand didn’t match expectations. On the flip side, the last thing a company wants to hear is that they lost a customer because they simply could not provide the product or service due to a lack of inventory. 

Some companies utilize demand planning software to automate this adaptation process. 

The key to demand planning is adjusting based on internal and external factors such as market trends, global affairs, and even the weather. To forecast demand accurately, a company must be aware of all the potential factors that could influence its target audience at any given moment. For example, if a company’s specialty is selling and installing hurricane impact window shutters, a natural disaster forecast will greatly influence upcoming demand. 

“A successful supply chain depends on an accurate forecast. Demand planning plays an essential role in ensuring that product is delivered to the consumer on time and in full.”

Ryan Sprague
Customer Supply Chain Manager

A successful demand planning process will leave you with accurate revenue projections and fewer opportunities for production planning surplus. 

Why is demand planning important?

Imagine you’re hosting a dinner party with your famous mac ‘n’ cheese on the menu. Once you bring the platter out, it’s gone instantly – and some guests didn’t even get a bite. You forgot that your mac ‘n’ cheese is so popular; it’s always the first dish to come up empty. 

Think about how different your experience would have been if you remembered the high demand for your mac ‘n’ cheese. Or perhaps your dish is not as popular and is practically untouched at the end of the night. What a waste of food! Next time, will you make the same amount for a crowd, or will you adjust your supply based on your demand?

If you plan to change things up because of what you learned, congratulations! You just did some demand planning of your own! 

Effective demand planning offers something that can’t be googled or researched externally: a comprehensive, fully individual look into the inner workings of your company and what your unique customers are expecting from you.  

Demand planning and forecasting

Forecasting is the actual analytical data involved in the demand planning process. 

Forecasting utilizes quantitative and qualitative data. 

Quantitative data comes from previous sales, revenue, and historical information regarding inventory and potential surplus from past periods. Qualitative data comes from a business’s understanding of its customer base. A lot of this information comes from how much a business knows about market trends, who their customer is, and what their customer wants or needs right now. 

Forecasting relies heavily on the knowledge of what customers are willing to spend their money on. This means that a company needs to look at its service or product lifecycle with less bias. Using realistic judgment and accepting the honest reality of changes in demand, even if they may not skew in your favor, is detrimental to create accurate forecasts and accurate demand plans. 

Demand planning and supply planning

Supply planning is the process of determining how to fulfill needs that have been found in the demand planning process. In the simplest of terms, supply chain planning is the direct result of demand planning. To successfully plan your supply, you must utilize your demand planning forecast results. 

Because demand planning and supply planning work so closely, demand planners and supply planners must as well. While a demand planner utilizes forecasting data to make demand suggestions, the supply planner takes those suggestions and creates a plan of action for purchasing or creating materials needed to fulfill the projections made in the demand planning process. 

When a demand planner presents organized demand data and general suggestions regarding how to meet that data, a supply planner presents how that data can realistically be achieved with all company objectives in mind, including potential financial restraints. 

Like forecasting, supply planning also relies on demand planning to operate successfully. It would be impossible to attempt to do one without the other and achieve the same results.

Supply chain management software can help you automate the entire supply planning process by inputting information gathered from demand planning to predict the necessary next steps for inventory management and product or service supply. 

What is the role of a demand planner?

A demand planner is a person responsible for suggesting and decision-making based on demand planning results. 

The demand planner utilizes all of the data given and orchestrates the final demand plan needed to start the supply planning process. They will work with the necessary teams to ensure the accuracy of historical data and product or service sales. They are then able to present this information in an organized manner and refine the plan based on input from other teams such as marketing, sales, or executive management. Out of everyone in the company, the demand planner should have the most comprehensive and accurate view of sales expectations. 

Having a demand planner also presents the perk of having an ongoing demand planning process. Any new information or data that comes from a real-time sales cycle will be utilized by the demand planner to create the most up-to-date forecasts.

How to create a unique demand plan

So you’ve determined that demand planning is for you. Getting started with the demand planning process is as easy as looking at every aspect of your company and identifying the factors that contribute to changes in your demand. 

Follow the tips below to start your demand planning process.

Think outside of the box

External factors can potentially affect customer demand even more than the product or service itself. Figure out what would affect your industry and how that may influence what your customer is deciding to purchase at any given moment. 

Make historical data your best friend

Use all the old company data you’ve buried away to create new growth opportunities. That old data is extremely beneficial when trying to find trends within your own company’s demand cycle. Compare last month’s numbers to the month before, and determine what changed and why it did. Compare this time last year to now and see if the time of year may influence customer needs. Historical data is invaluable and holds the key to looking at your potential demand from a statistical point of view. 

Seek different perspectives

The people who know your company best are those who are helping it run on a day-to-day basis. Tap into the perspective of teammates whose jobs are to optimize your company’s supply and demand process. This includes your sales, marketing, and accounting/finance teams.

Allow these team members to be candid about issues they have identified in your current demand planning process, growth opportunities, and trends they may see from within the company. If applicable, you can even gain the perspective of the people you are actively trying to predict: the customer. Consider surveys or focus groups to gain valuable information regarding what your customers’ needs and wants are straight from them. 

Other outlooks to take into consideration are stakeholders, suppliers, distributors, and sometimes even competitors.

Identify key performance indicators

Every company has a set of standards they hold themselves to whether related to sales, revenue, or something else. These key performance indicators (KPIs) are a clear way for a company to determine what metrics they are trying to achieve at the end of the supply chain management process. Figure out what yours are and set them in stone. 

Find weaknesses

Once you’ve identified company KPIs, you will be able to compare these expectations to the realities using the historical data you previously collected. Notice any discrepancies in the supply and demand process. Consider if you are producing too much product or not enough. Make note of these weaknesses and you will begin to discover which aspects of your supply chain management cycles are not performing as expected. 

Predict demand using what you know

Use what you already know to create a comprehensible demand plan. Consider external factors, use historical data to find patterns in demand, discuss differing opinions with team members and customers, identify KPIs and weaknesses in growth, and start predicting what demand will look like next. Highlight trends and repeat behaviors in your previous demand cycles. 

Consistently update demand forecasts 

You are never truly done with demand planning. When opinions and needs are ever-changing, so is demand. That is why every company that goes through the demand planning process should make it a priority to update data and forecasts as often as possible. Your final predictions will only be as good as the accuracy of your planning.

Demand planning software

If regularly updating your demand plan seems tedious, consider implementing demand planning software. Companies use demand planning software to automate the entire process and subsequent changes to inventory reporting levels, production, and demand. 

Machine learning and artificial intelligence are the future of demand planning optimization. These processes increase prediction accuracy by implementing algorithms to analyze data from previous demand cycles and update forecasts based on new data given. 

To be included in this category, the software product must be able to:

• Withdraw inventory metrics 
• Turn new data into comprehensive forecasts
• Sustain an automated forecasting process
• Utilize analytic tools for predictions
• Construct legitimate predictions 

*Below are the top 5 leading demand planning software solutions from G2’s Spring 2021 Grid® Report. Some reviews may be edited for clarity. 

1. SAP Integrated Business Planning 

Respond to changing market conditions in real-time and fulfill supply chain management needs with SAP Integrated Business Planning. This cloud-based solution holds all the necessary tools to conduct short-, mid-, and long-term demand forecasting. 

What users like:

“IBP is easy to configure and is extremely easy to use. It gives you the standard Excel feeling and therefore users feel immediately comfortable with the system. I like the best fit statistical forecasting possibilities, automated cleaning, the possibilities of integration with other SAP systems, and the fact that we have the complete E2E planning process in only one application. Because it's Cloud-based, we always stay on top of the latest developments.”

- SAP Integrated Business Planning Review, Anette D.

What users dislike:

“Activating a planning area and the error logs associated with it is quite complex and solving the errors could be quite time-consuming. Since the planning area forms the backbone of planning this area should be further simplified.”

- SAP Integrated Business Planning Review, Kamna S.

2. BlueYonder: Demand Planning

With the help of machine learning, BlueYonder: Demand Planning provides accurate demand projections using unique demand-driven variables. This software allows a company to calculate business risks and predict consumer behavior. 

What users like:

“User Friendly. Very good for retail sector specially hypermarket and supermarket. Easy to understand and implement as well. Best for time management. Good for inventory and stock taking.”

- BlueYonder: Demand Planning Review, Abid Hussain S.

What users dislike: 

“Cumbersome to get started in. Like all software, it took time to learn all the ins and outs well enough to function.”

- BlueYonder: Demand Planning Review, Jeffrey D.

3. Logility Solutions

Accelerate the supply chain management process with Logility Solutions. With a blend of artificial intelligence and innovative analytics, Logility allows you to automate your demand plan and find greater visibility into your business goals. 

What users like:

“Logility is very dynamic and offers many ways and models to customize your inventory/sales forecasts to best suit your particular business. There is a wide array of controls in all of the modules that work together to give you reasonable and trustworthy inventory and sales forecasts.”

- Logility Solutions Review, Rich J.

What users dislike:

“You will find that data visualization is easy and you can SEE what your data is doing. We do wish that formatting was a little easier or there were additional options for formatting. The learning curve can be a little steep on the backend, especially if you do not have a dedicated technical resource.”

- Logility Solutions Review, Tara C.

4. NETSTOCK 

If you’re looking for another affordable cloud demand planning solution, NETSTOCK is for you. Use NETSTOCK to balance inventory, ensure stock is made efficiently, and create reliable forecasts. 

What users like:

“What I like the most about NETSTOCK is the ability to view all aspects of inventory in one area from the overall stock holding figures right through to any potential stock-outs. Everything is there for you to make a more accurate calculated judgment to manage your inventory and improve your procurement performance.”

- NETSTOCK Review, Alan P.

What users dislike: 

“Our past demand is a bit difficult to figure out, so NETSTOCK tends to give us a flat forecast. They are coming up with new and better ideas as to how to have this be less manual intervention for us - but, I feel that if we were able to manually override past demand, this will allow for manual intervention of the future forecasts.”

- NETSTOCK Review, Lori D. 

5. Oracle Demantra 

Oracle Demantra uses its state-of-the-art forecasting techniques to help you forecast accurately and demand plan. They provide different workflows and spreadsheets to organize demand information including quantitative and qualitative data. 

What users like:

“This is an enterprise-level application for demand planning which tells you what, when, and where to sell. This demand planning module is well suited for the FMCG industry. It comes coupled with Oracle ASCP which gives you a sort of high-level resource planning. If integrated with inventory optimization, production scheduling, global order promising, any organization can leverage the maximum benefit out of supply chain planning.”

- Oracle Demantra Review, Prakash M.

What users dislike: 

“There seem to be a lot of monotonous steps to complete a deal. I think some of the steps could be removed to speed up the entry process. I would like the hierarchy to be more clear as well. I think there also could be fewer limitations as far as adding and removing categories.”

- Oracle Demantra Review, Michele E.

Forecast of the day: clearer strategies ahead

Things get pretty cloudy when you don’t know what is going to happen next. 

You don’t have to be a clairvoyant to predict future customer demand. Whether you decide to hire a demand planner, plan everything yourself, or get a nice AI friend to help you out, having a process in place to forecast demand is only going to help optimize your supply and demand cycles. 

After all, you wouldn’t want anyone to miss out on your next dish of mac ‘n’ cheese. 

Have you identified your demand planning needs? Consider using business intelligence tools to help with complicated analytics that come with the supply chain management process.