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Demand planning is a strategic business process that anticipates future demand for services or products. It collates historical sales data, external factors, and market trends to come up with accurate projections. This process helps organizations make choices concerned to - production, resource allocation, and inventory management to meet customer requirements efficiently. By leveraging advanced analytics and data-driven methodologies, companies can improve their procurement strategies, decrease costs, and foster a more adaptive and agile supply chain.
Demand planning is significant for businesses as it includes forecasting future customer demand to ensure economical and efficient product delivery. It assists in maintaining optimal inventory levels, decreasing the risk of overstock and stockouts situations, thereby minimizing wastage and managing storage costs. Accurate demand planning improving supplier coordination optimizes supply chain operations, logistics, and production schedules. This leads to better customer satisfaction by ensuring product availability when required. Moreover, it positively impacts financial performance by decreasing costs related to excess inventory and lost sales opportunities in a competitive market.
Demand planning needs coordination between various sectors, like marketing, sales, buying, the supply chain, operations, and finance. Its key elements are:
1. Product Portfolio Management: A detailed understanding of products and their life cycles is significant for effective demand management. It thoroughly details a product’s life cycle, from its origin until its eventual phase-out.
2. Statistical Forecasting: It is based on the traditional concept that historical data best predicts future performance. It uses advanced mathematics and complex algorithms to scrutinize past data and build supply chain forecasts.
3. Demand Sensing: It is where new data sources like weather, government data, etc., with historical data and applied to advanced math's and complex algorithms to detect demand quickly.
4. Trade Promotion Management (TPM): Trade promotion utilizes events such as discount prices or giveaways to attract more customers. It ensures that opportunities are correctly executed and provide all expected benefits.