Companies make all kinds of operating decisions based on how much demand there is for their products. Demand planning ensures that the decision-making process happens prior to the point of sale so that companies are in the best possible position to efficiently and effectively meet that demand. Implementing solid demand planning practices, therefore, offers a number of benefits. Here are 4 reasons why demand planning is a critical business practice.
1. It’ll make you more proactive
No company wants to be in a position where it’s scrambling to fulfill orders and, therefore, racking up the costs because it has to expedite orders and pay employees overtime. Nor do companies want to experience the opposite problem, where moving inventory is a struggle. Demand planning gives you the opportunity to nip those problems in the bud before they become major headaches. Instead of reacting to the current reality, you’ll be able to prepare for the future.
2. It’ll make you more agile
Even with the help of cutting-edge tools and solid S&OP processes, demand forecasts are rarely 100% accurate. Your company will always need to make on-the-fly adjustments to your supply chain here and there due to unforeseen events, whether that be ordering additional SKUs from your supplier or making other shipping arrangements to ensure your products reach customers on time. But demand plans make it much easier to absorb the impact of any unexpected fluctuations in demand. Reaction times are quicker, and hiccups are usually minor.
3. It’ll improve customer satisfaction
Happy customers are loyal customers. Yet in a world where same-day shipping is becoming more and more the norm, expectations for near-instantaneous — and impeccable — service are at an all-time high. If you’re operating blind (that is, without a demand plan), it becomes impossible to keep up and maintain high levels of customer satisfaction. Stock outs and longer lead times, especially if frequent, frustrate customers. And ultimately, this has a negative effect on brand loyalty — something your competitors will be all too eager to exploit.
4. It’ll reduce operating costs
Demand planning makes sure your sales and operations processes are aligned and working in concert to satisfy your customers’ needs. A natural byproduct of that is increased efficiency. What’s more, using a demand plan helps ensure you’re not storing more inventory than you can sell at any given time. And as your company optimizes your inventory levels and starts to shed redundant processes, you’ll start to see a positive effect on your bottom line in the form of reduced costs. In essence, demand planning enables companies to make deliberate, well-thought-out decisions about how to manage their supply chain. And since a smooth-running supply chain is the lifeblood of a business, it’s imperative that companies invest significant time and energy into properly implementing solid demand planning processes.
Given how massive an undertaking this is, however, It can be difficult to know where to begin. Fortunately, you don’t have to go it alone. Take the first step towards upgrading your own demand planning capabilities by scheduling a consultation with one of our Forecast Xperts today.
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