The term Demand Planning itself says that it the process in which you forecast the demand for a particular good or service.
At an initial stage of a company, the most significant question is How much to produce? And here comes the Demand Planning in action. With the Help of Demand Planning the higher management decides how much should be the production quantity for that specific product or service.
According to Jonathon Karelse expert forecasting, demand planning, and operations working for NorthFind Partners the Term Demand Planning is the Process in which you decide how will be the future demand for your specific product or service and on that base, you start the production and maintaining your inventory. In a recent interview with Jonathon Karelse, he also said that Demand planning is a multi-step operational (SCM) supply chain management process utilized to produce reliable forecasts. An active demand planning can lead companies to increase the accuracy of income forecasts, adjust inventory levels with troughs in demand and peaks, and improve profitability for a particular product.
The Differences Between Demand Planning and Forecasting:
What are the aims of business? To earn more and more profits! From a supply chain view, how do we achieve this? Let’s take a glance at the critical points of how supply chain adds to the aims of the company.
We know how valuable our demand planning role is to assuring operations are efficient, timely, and cost-effective. We need to ensure availability of the product to increase profits in the market but also understand inventory is a tradeoff as it affects your business capital. Active demand planning then needs a diversity of knowledge such as timely, as accurate as possible, useable, quantitative and qualitative to forecast the products we sell correctly. The end purpose is to give useful information for the Sales and operations planning process to assure we are accurately planning demand.
Understand the Demand for your Products.
Knowing the demand for your product goes beyond the fundamental of what type of demand are we discussing. For any particular product, there may be dependent demand, independent demand, and service parts demand. We usually are forecasting possibly service parts and independent demand, but all kinds of demand have to be predicted for in our supply chain processes to guarantee availability when required.
Demand Volatility is one of the first pain points. In common, the more we understand about the demand for our goods, the better our forecasts will be. For example, the bullwhip effect produces demand volatility that becomes increased as it moves throughout the supply chain. While this can be a huge problem, it is also a possibility for information sharing and collaboration, two ways to guarantee a better understanding of what your demand really is.
Read more such interview on Supply Chain Management, Business Forecasting, and Demand Planning by Jonathon Karelse here.
