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Tuesday, 6 April 2021

Beginner's Guide to Demand Planning


Demand planning helps you to make sure your shelves are stocked, but not overflowing. A way to ensure this is well managed is to manage sales planning and operational tactics to get the job done.

This is where demand planning comes into play.

What is Demand Planning?

Demand Planning is a way to anticipate the volume of upcoming sales. This forecast predicts and prepares sales to be prepared in what to expect as a way to ensure proper resources are available to successfully fulfill those sales.

Demand planning is an integral way to support the sales of physical products. Ways to do this include the fulfillment of purchase orders, extension of labor services, or ensuring adequate staffing.

Demand Planning vs. Demand Forecasting

Demand Planning and Demand Forecasting are two different scopes. Demand Forecasting is a necessary function of Demand Planning however, Demand Planning encompasses a much wider scope. Which includes a cross-functional collaboration between the forecast analysis, adjustment of inventory, and customer support requirements. 

Why is Demand Planning important?

Without Demand Planning, customers may have to wait much longer than expected for their products or wait too long to get help from your understaffed team. This is directly attributed to a poor customer experience. Which leads to customers being less likely to becoming repeat customers or avid referrers.

Other problems that you may face include overstaffing and overstocking which are very costly mistakes even in the short-term. 

The Process

Your most important step: Hire someone with forecasting experience

Demand Planning always carries uncertainty. No one is able to predict the future with 100% accuracy, but the big question is "by how much?".

Here are the 3 basic steps you can take to compensate for any experience that you may not have at your disposal:

  1. Collect and analyse data
  2. Define business goals
  3. Collaborate across teams

1. Collect and analysis of data

Collecting data isn't difficult but collecting 'clean' data is important to support the foundation of a strong demand planning strategy, but that data can come from a variety of different sources. This is part of the process that is also known as demand forecasting.

  • Historical Data
  • Contextual Data
  • Sales Forecasting

2. Define business goals

After analysing your data, you might come to some actionable conclusions. 

Customers will be taking more online courses this fall, and fewer in-person workshops

Historically customers have a tendency to take more classes during the winter and there are fewer in-person classes due to COVID-19. Forecasters would have already seen a drop in the in-person workshops pipeline and an increase in online sign-ups.

This would help to develop clearer business goals.

This winter, we aim to drive 90% of would-be in-person workshop attendees to our online courses.

3. Collaborate across teams.

To realistically accomplish these goals would require teamwork which requires a buy-in from leadership across multiple different departments. It's important to make sure all key stakeholders are briefed on the demands, and what their part is in meeting those demands.

Conclusion

Building for a strong sales funnel is important for any small malaysian business, but make sure you plan for your demand. Strong sales with inadequate demand planning could lead to a detrimental sales delivery.

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