Why Demand Planning Is Essential to a Business

by | May 29, 2018 | Business

Demand planning is an operational step in the supply chain management process. This process essentially creates forecasts of demand for a product. With this knowledge, you may wonder how exactly it can help your business.

Help Stock Appropriate Inventory Levels

If you must keep inventory on hand, demand planning can help you assess which products to order, how much to order and at what intervals to order to meet customer demands. Ordering the proper amount of inventory, or close to it, can save money. This is because you won’t be overstocking or over purchasing goods you are unable to sell.

Help Decide Where to Place Focus or Money

Demand planning has an analysis component that can help determine which products or product lines are in demand or profitable. This information is important in the supply chain process because it can affect many other decisions you make. You may decide to increase marketing for a particular product, create variations of a product, rebrand a product, change marketing strategies or even ultimately pull a product off the market. Understanding how the demand process works is essential to provide customers with items they actually purchase, thereby sustaining your business.

Get an Accurate Picture of Proposed Profits and Losses

Businesses often forecast their revenue and profitability as well. With great demand planning, this can increase how precise the forecast is. This is because once the demand is assessed, how much money is placed into purchasing inventory and other steps can also be gauged, and a revenue model can be developed. When this is developed, a business owner can go back and readjust steps within the entire supply chain model to tweak the demand or proposed revenue outlook to their needs.

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