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Demand Planning in a Dynamic Supply Chain
Demand Planning in a Dynamic Supply Chain

August 3, 2022

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In a situation of steadily increasing inflation and the world returning to its pre-pandemic state, the supply chain has been hit pretty badly. Demand has become dynamic, and supply is complex due to global geopolitical circumstances. Where some companies are facing significant stockouts due to the slowed-down supply chain, others ordered excess inventory and are now stuck with overstocked warehouses.

These realities reaffirm the importance of Demand Planning Software for businesses. Over the past two years, companies that have relied on demand planning and forecasting tools have experienced less loss and damage than those that haven’t. Demand planning is a prerequisite for a successful supply chain, and advanced software can help you achieve it. In this article, we discuss what demand planning is and how you can utilize efficient demand planning tools to grow your business.

What Is Demand Planning Software?

Demand Planning Software performs two major functions: demand forecasting and supply planning. Demand forecasting enables you to predict how your supply chain will change in a defined future time period and the factors that influence it. With this data, you can forecast demand, analyze what can cause a change in demand, and determine how to increase demand. Supply planning allows you to better manage operations like inventory planning, safety stock optimization, and production to cater to the forecasted demand.

Demand Planning Software also monitors how changes in demand will affect the rest of your supply chain so that you can make smarter business decisions. Using your sales data and market analysis, it determines ongoing trends and likely changes in the market and how those will impact demand. It is often called demand management software, since managing demand is a key function in managing your entire supply chain.

 Why Do You Need Demand Planning Software?

A demand planning system assists the initial steps of your supply chain by predicting demand for a defined future period, e.g. a quarter, 12 months, 60 months. Here are six ways you can use demand planning software to effectively manage your supply chain.

  1. Better Manage Inventory

When you thoroughly understand your demand, you can use it to plan your inventory better. Your demand planning data enables you to ascertain the products and quantities required for the coming period. You can also determine your best-sellers to ensure you never stock out on those products. This also saves on inventory space, since you only store what you need. Plan demand by location to reduce lead times with more accurate warehouse stocking.

  1. Improve Customer Satisfaction

A major goal of any business is to provide the highest-quality service to its customers. When you have the right products on hand in the right place, at the right time, your lead times go down and you don’t have to worry about stocking out. This leads directly to higher customer satisfaction and improved customer service. Satisfied customers in turn improve your bottom line. This is one of the most important benefits of Demand Planning Software.

  1. Optimize Safety Stock

Safety stock helps you stay afloat when demand increases unpredictably and your inventory diminishes. Excess stock is stored to ensure uninterrupted supply in situations like stockouts or delays in replenishment. With demand planning tools, you can calculate your safety stock so you have the right amount of stock on hand for backup, while still minimizing storage costs. As demand changes, you can recalculate your safety stock accordingly.

  1. Plan Smart Promotions

Pricing often depends on external factors and market changes. The data from demand planning can aid pricing and promotion planning. Analyzing your existing stock enables you to see when to introduce promotions or discounts to increase sales during a low-demand period. You can also use “what-if” analysis to plan for every situation and maximize your revenue in every scenario.

  1. Save On Warehousing Costs

Many brands store excess inventory to ensure availability. But this often leads to higher warehousing costs. With effective demand planning, you only store the products you need, thus reducing warehousing and storage costs and avoiding lost sales. It also reduces the likelihood of needing to sell products at discounted prices to exhaust excess inventory.

  1. Avoid Waste

Accurate and timely demand planning enables you to make smarter inventory decisions, so you only store the products you need. This reduces inventory waste, especially for perishable products, as well as reduced loss due to dead stock. You need less inventory space and save on warehousing costs.

 

 


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Karishma Shikalgar
Marketing Manager

Avercast LLC is an industry-leading supply chain management company that integrates 250+ advanced forecasting algorithms.

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