Have you ever run into issues with a backorder or piles of dead stock? If so, it sounds like you need to work on your demand planning.
Demand planning plays a major role in your ability to maximize profits and ensure order fulfillment goes smoothly (see order fulfillment meaning).
Read on to learn all about demand planning including some best practices, tools you can use, and roles in the field.
Demand Planning Definition
Demand planning is a business process where you predict the customer demand for products. It allows you to perform inventory forecasting, calculate the reorder point, plan for revenue growth, and more. That's why it's so important to get the demand planning process right.
Demand Planning Process
Creating a demand planning process requires looking at many factors. Though your situation will be unique, there are many steps that all demand planners can use to find success.
Here are the key steps to include in your demand planning process:
Accrue Data
The first thing you need to do is pull relevant information from your tracking tools. This may include sales data from the sales team or a POS system, inventory levels, supply forecasts, and more. Together this data will allow you to get a holistic view of demand fluctuations and areas where you can improve processes. You should also establish a set of KPIs for this data, so you can gauge success and catch any extreme variations in data.
For food suppliers, BlueCart eCommerce is a great tool for this. This all-in-one DTC and online marketplace is designed to streamline processes and make selling easy. It has a slew of useful reports that let you see trends easily and help establish buying behaviors.
Create a Forecast
Using the data you've pulled, your next step is creating a demand forecast. You should be able to find larger trends for product categories and discover seasonal fluctuations. These will allow you to estimate the next few months' worth of demand. Avoid letting seasonal shifts affect your overall strategy as they likely won't be replicated off-season.
Work With Customers and Suppliers to Make Adjustments
All the data in the world is meaningless if it doesn't match your customers' attitudes or suppliers' abilities. Speak with your best customers and suppliers to get their valuable insight and see how it compares to your data. Your suppliers will conduct their own demand forecasting, so working together can help streamline the supply chain. This will also help you avoid running into issues with the bullwhip effect as you'll be on the same page from the start.
Demand Planning and Forecasting
Demand planning and forecasting are often used interchangeably but are actually not the same thing. Demand planning is a process that consists of collecting data, discovering trends and patterns from it, then acting upon that data to establish a forecast of future demand trends. As such, demand forecasting is a part of the overall demand planning process.
Supply Chain Demand Planning
Demand planning in the supply chain is vital as it helps avoid issues with backordered products or excess inventory. Avoid excessive inventory by learning about the benefits of SKU rationalization, and how it can streamline supply chain operations. Forecasting correctly will help every business along the supply chain and ensure you don't damage relationships. Improper forecasting can send a ripple of demand along the chain that can cause massive issues with supply levels. The most important part of supply chain demand planning is sharing your forecasts with your suppliers, so you can work together to meet demand.
Demand Planning Inventory Management
Demand planning and inventory management go hand-in-hand in ensuring you can meet customer demand while keeping costs low. Demand planning gives insight into the correct amount of product to purchase to meet demand without purchasing an excessive amount of safety stock. It's important for your lead warehousing staff to be kept informed of demand plans, so they can properly control what products are ordered, where they're stored, and what staff are needed. Ensure these details are included in your warehouse manager job description, too. This will keep your profits high, overhead expenses low, and ensure the inventory manager salary you're paying is going to great use.
Demand Planning vs Supply Planning
Demand planning and supply planning go hand-in-hand but are not the same thing. Demand planning is focused on forecasting customer demand for a given product. Supply planning is focused on managing inventory levels and ordering products to meet demand forecasts. Together, they create a cohesive inventory management process that allows you to limit the inventory to stock and maximize profits.
Demand Planning Software and Tools
Since demand planning involves so many moving parts, there are many great options for software and tools to help streamline the process. Stick with software that comes from well-known companies and that work within your industry. Since so many parts of your business rely on demand planning, this isn't an area to skimp on.
Demand Planning Software Reviews
With so many options for demand planning software on the market, including hospitality procurement software, looking at reviews can be very helpful. We've compiled a list of the best-reviewed demand planning software for you.
Here are the three best-reviewed demand planning software:
SAP Integrated Business Planning
SAP is one of the most well-known eCommerce providers with a wide range of software and tools. Their cloud-based business planning solution is a popular choice for medium and large businesses. It combines sales and operations planning, demand forecasting, inventory planning, and more into one comprehensive dashboard. It also integrates out of the box with other SAP tools, so you can use the data to optimize your inventory control and maximize revenue.
Logility Solutions
Logility Solutions is an AI-based supply chain demand planning platform. This embrace of new technology means it is one of the most forward-thinking tools on the market. It also means it's built with automation in mind. If you already use an eCommerce marketing automation tool, pairing it with Logility Solutions is a great way to cut out a lot of extra effort and money. This lets you grow your business while keeping costs and processes as limited as possible.
Oracle Demantra
Oracle is another major player in the business software market and that shows in their demand planning tool. Demantra is a robust, but user-friendly piece of software that handles demand management, sales & operations planning, promotions, and more. It also natively integrates with all other Oracle software. So, if you're using an Oracle headless eCommerce platform or other tools, there's no reason not to stick with Demantra.
Demand Planning Reports
Demand planning is meaningless if your reports don't accurately show data or convey your message. It's important to put time and thought into crafting the most useful reports possible.
Here are a few best practices for creating demand planning reports:
First, personalize them for your audience. Sometimes your reports will be going to other demand planning experts, and sometimes they'll go to upper management. Make sure the language used fits the audience. If management doesn't understand what you're saying, they can't act on your report.
Second, pull reports on a regular cadence. Demand can shift at the drop of a hat. That means keeping your eye on the data is vital. Pull reports regularly to ensure you notice trends early and can provide actionable data. This will ensure you limit financial losses from shifts in demand and avoid issues with inventory levels.
Third, focus on long-term trends. Anything shorter than three months’ worth of data can't accurately show performance. Numbers can easily be skewed by seasonal demand, data integrity issues, warehouse problems, and more. Try to find the sweet spot for your company that can accurately represent your moving average as well as note any unusual shifts in demand.
Is Demand Planning a Good Job?
Demand planning is a challenging, but highly rewarding field. Demand planning has evolved in the last decade from an entry-level job to mid-level and up. This is due to the increased access to data from eCommerce analytics and the usage of complicated tools like an ERP accounting system (see ERP meaning). Consider the benefits of ERP, too.
If you're the type of person who enjoys poring over analytical data to discover patterns and trends, you'll likely enjoy demand planning. Luckily, salaries for demand planning roles have also increased, so you'll also earn a pretty penny.
Demand Planning Forecasting Certification
Prospective and current demand planners can acquire a certification to prove their expertise and increase their value to a company. The most sought-after certifications are from the Institute of Business Forecasting & Planning (IBF). They offer three levels of certification: Certified Professional Forecaster (CPF), Advanced Certified Professional Forecaster (ACPF), and Certified Professional Forecaster-Candidate (CPF-C). The exams include topics ranging from sales and operations planning to data analysis to forecast modeling and more.
Demand Planning Manager
A demand planning manager is an upper-level manager who oversees all aspects of demand planning and forecasting. They work with management, inventory, fulfillment, marketing, and sales teams to determine demand trends and establish plans. They must also accrue data from eCommerce software, hospitality software, and other tools to find trends and maximize profit. This role often has junior employees who pull reports for them, including demand planning analysts.
Demand Planning Analyst
A demand planning analyst is an employee who sorts through data to establish demand trends and provide forecasts. They must sift through various reports, track average inventory levels, look at seasonal trends, and more. This data is then used to create forecasts to help ensure the correct amount of product is ordered.
Demand Planning Coordinator
A demand planning coordinator is responsible for acquiring demand data and delivering recommendations on flow, assortments, inventory levels, and potential opportunities. They work with multiple departments and serve as a project coordinator to ensure alignment between all parties. Demand planning coordination may fall under another title at different companies.
Demand Planning Salaries
Demand planning is a complex process, so there are a few jobs in the field with a wide range of salaries. Depending on your level of experience and skill, you can make between $60,000 and $100,000.
Let's take a closer look at three jobs in the field and their salaries.
Demand Planning Manager Salary
The average salary for a demand planning manager is $100,628. To ensure the most accurate number, we took the average demand planning manager salary from the five largest nationwide employment websites.
A demand planning manager’s salary depends on experience, location, and business size. For example, the average demand planning manager salary in California is just over $122,000. While the average salary in Illinois is about $105,000 in 2021. Cost of living plays a big part in salary. So, keep that in mind.
Given those numbers combined with the fact that demand planning management duties take an average of 40 hours per week, demand planning managers make an average of $48.38 an hour. They have a lot of responsibility in forecasting demand and allocating resources.
Here’s the data we used:
- Salary.com - $109,500
- Glassdoor.com - $107,770
- Indeed.com - $102,161
- Payscale.com - $93,137
- ZipRecruiter.com - $90,574
Demand Planning Analyst Salary
The average salary for a demand planning analyst is $65,000. This is a mid-level team member responsible for using analytical, marketing, and sales data to estimate future demand. They report to a demand planning manager or senior demand planning analyst.
Senior Demand Planning Analyst Salary
The average salary for a director of eCommerce is $89,000. This role is the upper-level version of the previous role and comes with a slew of additional responsibilities. Senior demand planning analysts must oversee junior staff, compile reports for upper management, and are responsible for ensuring all data is accurate. They report to the demand planning manager or upper management.
Our Wish Is Your Demand
Demand planning isn't easy, but your efforts will be well-rewarded if you invest in the right people and tools. The most important aspect of demand planning is establishing inventory KPI and tracking data as it comes in. This will give you the ability to react quickly to shifts in customer demand and avoid issues with supply levels.
Frequently Asked Questions About Demand Planning
What is demand planning?
Demand planning is a process that includes data collection, statistical analysis, and data modeling. All of these processes are crucial to predict or influence demand, analyze sales, and more.
What are different aspects of demand planning?
The different aspects of demand planning include:
- Statistical Forecasting
- Consensus Planning
- Lifecycle Management
What are the 6 components of demand?
The 6 components of demand are:
- Trends
- Average
- Cyclical elements
- Seasonal elements
- Autocorrelation
- Random variation