Blog: Best Practices and Technology for Demand-Driven Planning

May 14, 2021 Bri Howard


Best Practices and Technology for Demand-Driven Planning

Demand forecasting, demand planning, and supply planning all play a role in the demand management process. Each of these components works together to form an optimized order and inventory management process. While it is impossible for organizations to plan for every possible circumstance, we've outlined several fundamental best practices to improve demand forecasting and order management.   

Be Adaptable to Supply Chain Disruptions 


Over the last 12 months, we've learned how black swan events can affect the supply chain (How Forecasting Demand Can Reduce the Effects of Unexpected Disruptions). 


Historical data only provides a partial view of past events, and sales and marketing data can vary from day to day. There are additional factors concerning demand, supply, and lead times that are more unpredictable. For example, demand for a particular product might increase significantly for a short period of time, but a supplier base may have limitations around product development and distribution due to a lack of raw materials. In this scenario, an efficient demand management process might involve diversifying suppliers, leveraging dropship suppliers, or even maintaining additional inventory to ensure that orders are met during those times of uncertainty. 



Be Proactive in Forecasting Demand and Inventory Requirements


According to a study conducted by the Logistics Bureau in 2020, "Only 22% of companies have a proactive supply chain network."


In our latest webinar, Forecasting Demand and Inventory Management, expert Fernando Gonzalez went into depth about five key areas where you can be proactive in improving supply chain visibility.


1. Safety Stock 

Safety stock is the additional inventory that is required to cover uncertainty. Also known as "Buffer Stock," this extra inventory helps prevent stock-outs when unexpected increases in demand occur.


2. Replenishment Analysis 

The replenishment analysis looks at the "order point" where a particular stock item falls into a range low enough to trigger a re-order to replenish the stock to a predetermined level. In addition, organizations should conduct a velocity analysis to gauge which items are in higher demand versus those items that move more slowly.


3. Lead Time Analysis 

With this analysis, organizations should examine the different components that affect the lead time for any given product. This includes the time required to receive the order, transmit the order to the manufacturer or supplier, and prepare the order, including the packaging and shipping. Utilizing this analysis in conjunction with safety stock can result in shortened lead times and increased customer satisfaction.


4. Vendor Managed Inventory (VMI) - Outsourcing 

Many organizations are looking to concentrate all their efforts on their core capabilities and products. They may not have the budget or resources to construct or manage a warehouse to fulfill orders within a given market. In this scenario, organizations should consider partnering with a third party to oversee processes, such as inventory control, warehousing, replenishment, and even drop ship strategies.


5. Order Management 

While the demand planning process serves to forecast and prepare for customer demand and uncertainties, the customer order management function is primarily concerned with managing orders and managing the customer order cycle. The interaction between the two is critical for a balanced flow of goods across supply chains.


Integrating New Technologies to Meet Modern Day Challenges 


In the webinar, Forecasting Demand and Inventory Managementwe asked attendees, "What supply chain technologies are you using to better feed your demand management?" Over half of the participants indicated that they utilized native features within their ERP. In this case, there can be overlap in using e-commerce platforms, electronic data interchange (EDI), and order management systems (OMS). Surprisingly, over a third of respondents said that they used no special technology at all, meaning that their processes were paper-based and manual.  


According to ThroughPut Inc co-founder and CEO Ali Hasan R, "Today, manufacturers are under constant pressure to reduce costs, improve supply chain efficiency, and enhance revenue margins. With a lack of clear visibility into their supply chains due to manual, reactive operational approaches and poor planning tools, they miss out on the much-needed deep insights. This keeps them from creating smooth, synchronized, and responsive supply chain plans to achieve the desired operational excellence."


The solution is utilizing integration technology that uses demand-driven analysis and real-time inventory updates to forecast demand more accurately and offer a comprehensive view of each component of a supply chain.


Supply Chain and Integration Technologies


Today, every part of the supply chain process must be tracked and accounted for sufficient planning.   


Outlined below are a few of the primary integration technologies used to increase visibility and reduce manual errors.




Whether you're using an automated system or something as advanced as machine learning or artificial intelligence (AI), incorporating technology into your supply chain processes is a crucial component for accurate demand planning. Thus, demand-driven companies that want to anticipate and recognize demand changes as soon as possible need to have effective supply chain management and integration technologies already established. Having these tools and following best practices enables them to respond quickly by aligning the proper operations and resources to support and facilitate "demand signals."



Want more information about forecasting demand and inventory management? Download the recording of the webinar with Fernando Gonzalez for further insights into the demand planning process.

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