Demand Planning: The Daily Definition
What is demand planning?
Demand planning is a strategy for making sure that your business stocks the right number of products. By forecasting the demand for your inventory, you’re able to plan ahead and make sure to purchase what you want to sell before your customers even ask for it.
Let’s say you run a flower shop, and during the Valentine’s Day rush last year, you ran out of roses. That’s a bad spot to be in, and unfortunately, you may have lost a few customers.
This year, though, you’re ready — you crunched the numbers from last year, and you’ve ordered a different amount of roses from your suppliers because of what you found. You took a look at how many roses you sold before you ran out, added that to the number of customers you had to turn away, and ordered a comfortable number of “safety net” stems on top of that. That’s demand planning.
Our two cents:
Demand planning is all about future-proofing your business. By accurately predicting your customers’ needs, you’re able to prepare your warehouse and avoid running out of stock.
The downsides of failing to adequately plan for future demand are obvious, and there are a lot of them. It’s not hard to understand why demand planning is critical to success for any business.
So what should you do if you aren’t demand planning, or if your current method isn’t working well? Start by paying close attention to your inventory history. Tracking inventory history brings a lot of benefits with it, and it makes forecasting a much simpler process. Easy access to the sales history for a particular item sheds light on who will purchase it in the future, and when.
If you don’t have a good way of accessing accurate inventory history data, well, that’s an ERP problem that you need to look into. Don’t let the wrong operational software hold you back from your potential.