Demand planning is often compared to weather forecasting.  It’s a specialized science yet no one takes much notice of the practice until it’s done wrong.  Accurate demand forecasting is incredibly important in just about any business as it has an effect on supply chains and company operations.  Here are some of the ways that demand planning impacts your business and how evolving consumer trends are changing the way companies view forecasting.

Demand Planning and Forecasting

Until the early 1980s, organizations sought to improve their operations through a very siloed approach, by focusing separately on improving logistics, manufacturing, or procurement.  There have been many improvements with the advent of supply chain management systems, including using analytics for demand planning and forecasting.  When a company employs these methods, they typically use signals such as customer orders, market indicators, or shipping numbers to predict future demand.  Unfortunately, some unsophisticated systems have been developed that are little better than systems of linked spreadsheets that are prone to error.  As distribution channels have become more complex in recent years, the need for more accurate and integrated demand forecasting solutions has grown in step with evolving consumer trends.

Understanding Evolving Consumer Trends

The way that consumers shop for and purchase products has drastically changed the landscape of both supply chain management and demand forecasting.  As online channels began to grow, businesses began developing separate forecasted demand schedules for both in-store and online markets.   Today, however, retailers are realizing that efficiencies are being lost with this approach and have begun to employ a more integrated demand planning process.

According to a recent report by Auburn University’s Center for Supply Chain Innovation, 56% of those surveyed said that they would be increasing investments in supply chain improvements in 2016.  Nearly half of the respondents indicated that they were dedicating more resources to omnichannel fulfillment.  A prime example of this is Target stores, who are integrating their online sales with their physical stores throughout the U.S.  In many stores, employees will pull products off of shelves to fulfill website orders.  In these scenarios, an integrated and optimized demand planning and forecasting system is a must.

Optimize Your Demand Planning

Most companies will agree that improving their forecasting accuracy opens up significant opportunities for growth.  An integrated demand planning solution is generally the best way to accomplish this.  According to The Hackett Group, this sort of system can help a company unlock the value of its supply chain in three ways:

  • Integrated demand planning can assist in determining leading market trends and their impact on the supply chain.
  • A comprehensive system can lead a company to create a set of best practices for demand planning geared toward improved processes.
  • An integrated demand planning system allows companies to measure against a set of key performance indicators.

In many organizations, the demand planning process remains one of the most complex and misunderstood parts of the business.  Moving from antiquated systems to an integrated demand planning system is often the best solution for most companies.  These systems have the ability to incorporate evolving consumer trends into a single demand forecast.  Effective demand planning is an evolving process that requires commitment and continuous improvement that will undoubtedly translate to the company’s bottom line.

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