The Value of Demand Planning

The Value of Demand Planning

One of the most fundamental concepts of business is supply and demand. Demand planning is a key aspect of your company’s success. No matter if you sell products or provide services, being able to predict customer demand is essential for turning a profit, sustaining and growing your market share, and satisfying your customer base. Demand planning offers business owners many advantages and here are some reasons you’ll want to devote resources to demand planning for your business.

The Benefits of Demand Planning

  • Help With Logistics: with inventory shipping and logistics are often an unavoidable part of doing business. Shipping and transport occur across the country every day and many companies receive shipments on a nearly daily basis. This makes logistics services an important (and expensive) part of your business. You need to have your logistics properly calculated to keep costs down and also ensure you have enough inventory to meet sales needs. For example, not ordering large enough shipments can lead to shortages and require multiple shipments increasing costs. The opposite is also true as overly large orders can also increase costs and drive up storage needs.
  • Can Help In Responding To Unpredictable Events: in business, there are several outside events that you have no real control over. These can include material shortages, weather events, natural disasters, world events, and other factors that can negatively impact your supply chain. An aspect of demand planning is you know in advance what stock levels you need to meet customer demand. Having this forecast information allows you to more effectively respond to outside incidents, so you can limit the impact on your supply chain. While some events are truly unpredictable, having a better idea of your business needs allows you to make corrections where you can.
  • Improve Efficiency: the production steps of your supply chain often run on strict timelines and may require outside purchases from third-party suppliers. With demand planning, you can predict your stock needs and, in turn, your production needs. This makes your supply chain more precise and avoids situations where you have to produce or order inventory on the fly which is both expensive and inefficient.
  • Manage Storage Costs: storing inventory can be a sizable expense for many businesses that deal in physical goods. Without accurate demand planning, your company can end up storing far more inventory than you need to meet customer requests. This leads to increased expenses due to having to rent storage spaces such as warehouses and employ staff to manage these properties. With an accurate demand plan, you can predict how much inventory you need to meet customer demand without overpaying for storage or over-purchasing stock.
  • Improve Staffing: proper demand planning improves the overall effectiveness of your supply chain. By understanding demand, you understand your inventory needs, which make material purchases and production needs easier to track and forecast. With more precise production figures, you ensure you have enough employees hired to meet business needs. In addition, by knowing your exact staffing needs, you avoid overstaffing, which wastes money and other company resources.
  • Improve Customer Service: good customer service is a cornerstone of a successful business. In the modern marketplace, customers have more choices than ever so when they come to your business you need to have appropriate levels of inventory. Shortages and low stock numbers frustrate customers and can cause them to take their business elsewhere.

Final Thoughts

Planning for the future makes your company more effective in the marketplace. Being proactive on customer demand (instead of reactive) reduces unneeded expenses, increases efficiency, reduces waste, and keeps your customers satisfied with the goods and services your company provides. In the highly competitive modern marketplace you face competition from companies on a global scale so being prepared is essential for your success.

The Value of Demand Planning
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