A company’s supply chain is the process of getting its products from production, through the distribution process, and finally to the buyer. A well-developed supply chain will help a company reduce costs and gain additional customers, meaning that it will remain competitive in its field. Good management of your supply chain will lead to both lower costs and a more efficient production cycle. But how exactly can demand planning help this supply chain process?
What is Demand Planning?
When a company dabbles in demand planning, they are effectively predicting the future demand levels for its products. The ultimate goal of demand planning is to find that sweet spot that is right in the middle of supply and demand. If your supply is too high for the demand, your company will be stuck with an excess of inventory that it cannot quickly sell. If the demand for your product is higher than the amount you are supplying, you could soon be dealing with some very upset customers.
For example, a company that sells canned vegetables will always find itself in high demand, because many people eat canned vegetables. However, there has recently been a drought in the area where that company grows many of its vegetables for canning. This drought has been long and hard, resulting in the loss of many of their crops. Now the company finds itself with a high demand level, but not enough vegetables to meet that demand.
This situation could have been prevented with just a little bit of demand planning. Analysis of the year’s weather predictions may have been able to foresee the drought, allowing the company time to figure out an alternative to growing in that particular area. Instead, the company could have invested in greenhouses (where the weather would not have an impact), or else contracted farmers in another region to grow their crops for them.
Demand Planning and the Supply Chain
So how exactly can successful demand planning improve the supply chain? Well, it all comes down to technology, which is forever advancing. With new technology, a company can easily update any forecasts or predictions in real-time, which means that supply chain professionals will be able to quickly and easily adapt to any situations that may arise. This new technology will also help boost a company’s profitability, due to the fact that it can now cut costs in operations when it is beneficial to do so.
Long story short, successful demand planning will help a company be more proactive because the employees can now spend their time filling orders, rather than scrambling to find out how they are going to fill orders. Companies can also be more agile in the case adjustments are needed to their plan. This is because most of the demand planning has already been done. If there are any adjustments that need to be made, it will still be easier than starting from ground zero. Customer satisfaction will also be improved since there will be lower chances that the company’s products are out of stock.