Demand Planning Software

The capability of organizations to better their inventory metrics usually peaks with the basic inventory forecasting capability that is offered in their ERP system. While these industry-specific distribution and retail management solutions provide quality inventory control, they can miss the mark when it comes to advanced analytics.

Demand planning software provides real-time inventory analytics to increase forecast accuracy and help your business have just the right amount of inventory on hand. This will help ensure your supply-chain process flows as efficiently as possible and reduce stock-outs.

What Is Demand Planning Software?

Demand planning and forecasting software is a sales and operations planning (S&OP) technology that meets customer demand with the necessary level of supply. This is accomplished by coordinating data from separate units of the business (primarily sales, marketing, and operations) to make more informed supply chain planning decisions that directly relate to inventory optimization.

Accurate demand planning involves collecting historical data on order volumes and inventory turns while mixing it with continually updated forecasts from your sales personnel.

Demand planning solutions can be thought of as a business intelligence tool specifically for supply chain analytics. The software can estimate future sales to improve the accuracy of inventory management and its replenishment, better plan purchases, and ensure proper stocking levels.

The goal of demand planning software is to manage your supply chain more effectively to increase inventory turns and fill rates beyond what your ERP system or supply chain management software can do for you.

Features of Demand Planning Software

Benefits of Demand Planning Software

The benefits of demand planning systems include:

Improve Sales and Operations Planning

The sales and operations planning process help businesses create plans to maintain current business and take on new customers with new products through proper management of the supply chain. The process can help merge insight from all departments of a business (such as sales, marketing, manufacturing, and more) to create an all-inclusive business plan intended to balance supply and demand. Execution between these departments centered around sales forecasts to make sure goods flowing through your supply chain is as optimized as possible.

The sales and operations planning process is something a business will want to conduct each month in various phases. This includes moving along the following processes:

• Sales forecasting: This is the generation of historical data (past sales) to analyze trends and create proper expectations (demand forecasts)
• Demand Planning: What are your current sales? What did your business forecast? Now, what did your business plan for? Demand planning in the sales and operations planning process is about validating your forecasts. Where does your demand typically come from? You’ll need to account for variability and adjust your inventory structure to account for it (if any).
• Supply Planning: Your business will need to ensure your production levels are as close as possible to what you previously planned for (via demand planning). This step is about assessing your ability to meet demand, by reviewing available capacity and scheduling your production/output to the necessary level.
• Reconciliation of plans: This stage will help balance your demand and supply with any financial considerations, and also ensure that the previous steps have been accounted for.
• Finalize and link to the implementation: The execution stage of the process, and the final step in the sales and operations planning process. Usually, for larger (global) companies, the process is put into place and funnels down to regional supplies (depending on if the operation produces items globally or sold and produce at a regional level)

More Accurate Stock Data With Inventory Optimization

Inventory optimization is about ensuring proper inventory levels are in place to meet your demand. Inventory optimization software automates the analyses of your entire inventory cycle.

An optimized inventory optimization solution will look at the differences between demand forecasts and historical sales data to come up with appropriate stocking levels. An incorrect forecast can lead to your business not being able to meet demand, which leads to products sitting idle, or even worse, that you aren’t able to fulfill sales orders on time.

Effective demand planning software will lead to your inventory being at its most optimal level by creating multiple what-if scenarios. This includes analyzing all parts of your supply chain, such as sourcing, production, warehousing, and transportation.

How does one change affect the other? What sort of impact does each change have on various types of inventory? Since inventory optimization can be seen as a form of predictive analytics, demand planning systems will give an accurate prediction of the amount and type of stock to carry.

Optimize Labor Management

Demand planning software can also be used to plan for labor demand rather than inventory optimization. This type of demand planning will accurately determine the number of workers available, which can influence costs and the quality of service provided to customers. The end goal of labor-management via demand planning software will be to drive employee engagement and performance to enhance business results.

Workload analysis capabilities allow decision-makers to determine the standard time to produce a unit. This is opposed to a traditional and more subjective method of estimating the number of employees required for upcoming production periods.

By using workload analysis, you can determine the estimated number of workers by dividing the estimated number of hours needed to meet annual production by the workability of your workers.

Workers can also be incentivized for good performance. By establishing benchmarks, you can maximize workforce potential by recognizing good performances. Conversely, this lets you get visibility into completed tasks and any employee downtime.

Integrated Cash Flow Management

By including financials into your sales and operations planning processes, your entire organization will be able to better understand the data and how it can help plan and shape your financial goals. This includes planning capital projects effectively and scheduling maintenance repairs efficiently–all while knowing how it affects your bottom line.

Demand planning software can also improve cash flow by providing insight into how current inventory is impacting finance. Too much inventory can disrupt cash flow–leaving you unable to meet demand.

By forecasting financials along with demand, you’ll be able to have a more sophisticated budgeting process. Depending on how far ahead into the future you forecast, you’ll be able to use financial projections based on projected demand when creating budgets or when speaking to executives and decision-makers–giving you increased credibility with stakeholders.

Types of Demand Forecasting Methods

As demand is the biggest factor used when creating sales forecasts, you’ll want to make sure your business is using the most appropriate type of demand forecasting for the products you manufacture, the market you’re involved with, the staff you have on hand, and more.

Most demand planning and scheduling software will use predictive analytics capabilities to determine (to ascertain of a possibility as possible) how scheduling, production, inventory, and staffing should be allocated for production. However, there are other methods of demand planning to consider:

Delphi Method

Known as being one of the more time-consuming methods of demand planning, the Delphi Method surveys experts anonymously. The surveys are administered in multiple rounds of questions, each new question being generated based upon the summary of results received thus far.

The end goal of the Delphi Method is to get these experts to arrive at a consensus opinion. In the supply chain process, this consensus opinion is used in development for the ideation of new products, which can affect the inventory kept on hand.

Conjoint Analysis

This survey-based statistical technique takes into account perceived value and relies heavily on asking customers what they want. This is more of a judgemental approach to demand planning, as the survey planners (the forecasters) will ask the participants to make trade-offs when conflicts arise.

If a customer wants product A, will they take product B that has similar benefits/features? In a supply chain, conjoin analysis helps businesses determine the importance of the attributes and price of a product. This can let businesses shift in the features offered or adjust pricing to hit certain benchmarks in their overall sales. It can also let them know when a customer may consider buying a competitor’s product over theirs.

What Is The Difference Between Demand Planning and Supply Planning?

Demand planning aids in forecasting customer demand while supply planning manages inventory to meet targets of the forecasted customer demand. This means demand planning is meant to guide supply chain operations, while supply planning relies heavily on demand forecasts.

Demand planners take into account a larger amount of data from multiple sources, such as past sales data to distributors and retailers. This data can be created into both constrained and unconstrained demand forecasting, which shows the maximum demand potential with and without limitations in cash flow and production capability.

Both types of demand planning allow the business to better manage client orders and keep supply costs low–accomplished by reducing the amount of inventory needed to his certain goals.

Supply planning is used to fulfill the demand plan while meeting the benchmarks of the organization, as it relates to inventory production and logistics. In short, it tries to meet the demand forecasts as efficiently as possible. Supply planning has a bigger focus on manufacturing lead times, minimum order quantities, leveling production, and managing safety stocks.

A supply plan can only work with a demand plan in place. This is because a supply plan will input the demand plan and all component data, which generates a master production schedule. Once in place, the supply planning reviews capacity and its impact on resources–making revisions as needed along the way.