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.
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.
|Sales and Operations Planning (S&OP)||The overall management of your sales plan and operations plan, which includes tracking sales per month by product family, demand management (such as new product promotions and special offers), production per month by product tracking, workforce and inventory level tracking, and backorder management|
|Demand Planning||Forecast demand for a product so it can be developed and shipped in as efficient as possible of ways|
|Inventory Planning||Identify non-performing inventory SKUs and avoid overstocking. Scale for error to ensure under and over-forecasting situations even each other out.|
|Supplier Management||Helps strategically plan and manage interactions with any vendors or suppliers of goods. Set reminders for reorders and reduce risk in your supply chain.|
The benefits of demand planning systems include:
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:
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.
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.
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.
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:
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.
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.
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.
Read more here: Demand Planning vs Supply Planning: What are the Differences?