{"id":28666,"date":"2023-04-26T14:54:00","date_gmt":"2023-04-26T13:54:00","guid":{"rendered":"https:\/\/localhost:10003\/demand-planning\/"},"modified":"2024-08-12T10:06:23","modified_gmt":"2024-08-12T09:06:23","slug":"demand-planning","status":"publish","type":"post","link":"https:\/\/www.ecommercefulfilment.com\/en_US\/resources\/inventory-management\/demand-planning\/","title":{"rendered":"The importance and benefits of demand planning"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">In the context of today\u2019s highly competitive eCommerce market, as well as uncertain economic conditions, it\u2019s more important than ever for businesses to try and squeeze every drop of value and efficiency out of their supply chain.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In today\u2019s article, we\u2019re going to take a look at the role of demand planning in this process.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is demand planning?<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Definition of demand planning<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Demand planning refers to the process of using historical data and predictive analysis to forecast the demand for a product or service.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It allows businesses to ensure that goods and services can be delivered efficiently, storage and logistics costs can be optimized, resources can be managed properly, and that goods and services are always available to the customer.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Importance of demand planning<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Demand planning is highly important for businesses that want to grow, be profitable, and offer the <a href=\"\/en_US\/how-to-improve-your-ecommerce-customer-service\/\">best shopping experience<\/a> to their customers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Accurate demand planning plays a huge part in improving a business\u2019 bottom line, whether that\u2019s helping to minimise storage costs, reducing wastage, eliminating stockouts, reducing the impact of supply chain disruptions, and more.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ultimately, demand planning is important because, when done right, allows businesses to strike the perfect balance between storage costs and customer demand.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Key challenges in demand planning<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Demand planning isn\u2019t a particularly straightforward process, with a mix of internal and external challenges often presenting themselves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Internal challenges include little or low quality historical data, which is the foundation of a smart demand plan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There may also be a lack of standardized processes within a business when it comes to demand planning, which can result in different conclusions from different or even identical data sets. Miscommunication and human error can also present a risk to demand planning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are also a considerable number of external factors that can be a challenge for accurate demand planning. Changing customer behaviour, volatile economic conditions, disruptive world events, seasonality, emerging trends, and new competitors entering the fray can all throw a spanner in the works.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Benefits of Effective Demand Planning<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Improved inventory management<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Perhaps the most impactful benefit a demand plan can bring to your business is the improvements you can make to inventory management. Some of these benefits include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Capitalise on trends and seasonality:<\/strong> By better understanding when demand is high, you can ensure it can always be met, and prepare marketing campaigns to take advantage.<\/li>\n\n\n\n<li><strong>Reduce storage costs:<\/strong> A demand plan can help you strike a good balance between having enough stock on hand to meet demand while preventing too much inventory from being placed in a warehouse.<\/li>\n\n\n\n<li><strong>Reduce wastage:<\/strong> By including BBE dates in your calculations, you\u2019re better equipped to reduce the amount of stock going to landfill or being recycled.<br>Inventory positioning: You\u2019ll be able to better understand high demand differs in each geographical location, and <a href=\"\/en_US\/inventory-position\/\">position your stock accordingly.<\/a><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Increased customer satisfaction<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Customer satisfaction is incredibly important for retention, loyalty, and of course, growth.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Customers are going to be satisfied when they know they can rely on you to have the products they want, and they can trust you to deliver the goods quickly.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Demand planning helps you to achieve this by helping you to reduce or even eliminate the amount of time items are out of stock or <a href=\"\/en_US\/backorder-meaning\/\">on backorder<\/a>, and helps you to cut down delivery times by <a href=\"\/en_US\/fulfillment-centers\/\">storing inventory in strategic locations.<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Furthermore, you\u2019ll be better equipped to communicate with your customers by developing marketing strategies in line with your demand plan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Better resource utilisation<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Accurate demand planning helps us to squeeze the most out of the resources we have available, whether that be human, machinery, technical, material, and so on.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Production scheduling, for example, can be timed correctly with an accurate forecast. If your suppliers are aware of when they\u2019ll need to begin manufacturing your goods well in advance, they can ensure they have enough resources available to ship your products to you on time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The same can be said for in-house capacity planning. Understanding when you\u2019re going to have busy or quieter periods allows you to adjust staff levels accordingly, and opens up possibilities for temporary workers, rather than full-time contracts.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased profitability<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Effective demand planning will increase sales and reduce costs, both being flagship ingredients for a profitable business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You\u2019ll have better sales because you will always have products in stock, meaning you\u2019ll never miss an opportunity to make a sale. Moreover, customer loyalty and retention will improve when a customer knows you\u2019re reliable. They\u2019re more likely to recommend you to people in their life, too!<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On the other end of the spectrum, demand planning helps reduce business outgoings by helping to make spending decisions more efficient. Stock levels can be kept at an optimal amount, inventory positioning can be better managed, human resources more aptly utilized, and shipping costs reduced.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key factors influencing demand planning<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Customer behaviour and preferences<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Understanding how, why, and when customers buy your products should be taken into account when demand planning. The better you understand customer behaviour when buying online, the better you\u2019ll be able to meet their needs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019ve been trading for a while, you might have a good amount of useful customer data already, whether it\u2019s customer service tickets, reviews, sales trends, and other forms of feedback.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Market research is key in this area, which includes surveys, focus groups, questionnaires, and interviews. Analysing social media accounts can also be an effective way of understanding customer preferences, as it\u2019s often the place where a customer or potential customer can voice opinions, complaints, and other useful information.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Economic conditions<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Demand planners need a good understanding of the present and predicted economic conditions to inform their planning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As we know, consumer confidence tends to take a hit when inflation and interest rates are high, whereas they\u2019re more likely to buy from you when there\u2019s disposable income in the back pocket.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In turbulent times, where people may be worried about personal finances, businesses may wish to cut back production and save on storage costs. This provides leftover capital to ramp up production again when the economic outlook improves.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Seasonality and trends<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The demand of many goods and services depends heavily on time of year and trends. You won\u2019t see much demand for sun cream during the winter, for example, and sales of Christmas decorations are going to be much lower in March.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Taking into account the fluctuating demand of goods and services over the year is imperative to accurate demand planning. Businesses should lean on historical data to identify high and low points in demand and be aware of industry trends that may impact demand around the year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Competitive landscape<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Being keenly aware of competitor activities, business models, marketing strategies and product offerings will result in more accurate forecasting. For example, you may notice that competitors run deep sales and certain times of the year, which might drive away demand for your products at the time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The demand planning process<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Step 1: Identify the data you\u2019ll need<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">An effective demand plan requires data from various sources and areas of the business. In most cases, you\u2019ll want to use sales data, customer data, inventory data, and shipment data as a minimum.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Remember that every business is different, and there may be other relevant information for you to collect.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 2: Collect the data<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In an ideal world, all the data you need will be digitized and easily accessible. This might not be the case if your data management hasn\u2019t been up to scratch, or you\u2019re using some archaic systems.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s important to dig deep at this stage, as you will be cleansing the data at a later stage. Draw on the aid of colleagues to find sales records, inventory reports, customer surveys, marketing statistics, and any other suitable data sources.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s a good idea to look at external data sources at this stage, too. This might include industry trends and demand signals such as economic predictions and world events.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 3: Organise and cleanse<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Now you\u2019ve collected all the necessary data, it\u2019s time to organise the data in a suitable format and begin the process of cleaning it up.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Whether you\u2019re creating simple spreadsheets or more advanced databases, it\u2019s important to ensure that everything is formatted consistently, errors and duplicates are removed, and all unnecessary information is cleansed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Try not to take shortcuts at this stage, as organising the data properly now will set the foundation for more efficient analysis in both the short and long term.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 4: Analyse the data<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">With your data in satisfactory state, it\u2019s time for analysis. Look for trends and patterns in your data, and pay close attention to your sales and inventory data.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here you should aim to identify the key drivers for demand in your business, which might include time of year, trends, marketing campaigns, or even economic conditions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Be sure to visualise the data to better understand patterns and trends, as you\u2019ll likely discover things you would\u2019ve missed if only using raw data.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Step 5: Choose demand planning method<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">When you\u2019re happy with the data analysis part of this process, it\u2019s time to start demand planning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are several different demand planning methods, and which is most suitable for you will depend on your skill level, data set, and the size and complexity of your business, and the specific goals and objectives of your demand plan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here are some of the most popular demand planning methods:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Historical data method:<\/strong> This is the most straightforward method, which involves looking at historical data to make assumptions and predictions about future demand. The more historical data you have, the more accurate your results will be. It\u2019s suitable for smaller businesses with a limited number of SKUs.<\/li>\n\n\n\n<li><strong>Econometric method:<\/strong> A more complex method that involves a series of calculations and the use of mathematical formulas. The econometric method makes use of internal sales data as well as external market data to make smart predictions about demand.<\/li>\n\n\n\n<li><strong>Delphi method:<\/strong> This method leans less on the data you\u2019ve compiled and more on third-party experts. It involves putting together a small panel of industry leaders and using their expertise to help predict future demand. The findings are then compiled into a report.<\/li>\n\n\n\n<li><strong>Sales force composite:<\/strong> This method leans heavily on your sales team for the best results. Each member of the sales team will predict how much they expect to sell over a given period of time. They\u2019ll be able to share their expertise in the current state of the market and use their own historical success to predict future demand.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">How to make demand planning simple<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">At J&amp;J, we help clients cut down the time it takes to create a demand plan, by gathering data for you in real-time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Our <a href=\"\/en_US\/fulfillment-software\/\">award-winning software<\/a>, ControlPort, has built-in data collection tools that automatically track and record all the inventory data you need to create a comprehensive, accurate demand plan in no time at all.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As an <a href=\"https:\/\/www.ecommercefulfilment.com\/en_US\/order-fulfillment\/third-party-logistics\/\">industry-leading 3PL<\/a>, we\u2019ll also store, pick, pack, and ship your products to customers across the world, powered by multiple fulfillment centres in the UK, EU, USA, and soon, Canada.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">With us taking care of fulfillment, you\u2019ll have more time for demand planning, marketing, product development, and everything else you need to do to grow your business. To get started or find out more, get in touch with us on <a href=\"tel:+44 (0)1604 968 820\">+44 (0)1604 968 820<\/a>, or fill in a <a href=\"#requestQuote\">simple online form.<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the context of today\u2019s highly competitive eCommerce market, as well as uncertain economic conditions, it\u2019s more important than ever for businesses to try and squeeze every drop of value and efficiency out of their supply chain. In today\u2019s article,&#8230;<\/p>\n","protected":false},"author":9,"featured_media":28575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_lmt_disableupdate":"yes","_lmt_disable":"","footnotes":""},"categories":[383],"tags":[],"class_list":["post-28666","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inventory-management"],"acf":[],"modified_by":"James Dillon","featured_image_src":"https:\/\/www.ecommercefulfilment.com\/wp-content\/uploads\/2023\/04\/Demand-1@2x.png","featured_image_src_square":"https:\/\/www.ecommercefulfilment.com\/wp-content\/uploads\/2023\/04\/Demand-1@2x.png","author_info":{"display_name":"J&amp;J Global Fulfilment","author_link":"https:\/\/www.ecommercefulfilment.com\/author\/james-and-james\/"},"_links":{"self":[{"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/posts\/28666","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/comments?post=28666"}],"version-history":[{"count":0,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/posts\/28666\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/media\/28575"}],"wp:attachment":[{"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/media?parent=28666"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/categories?post=28666"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ecommercefulfilment.com\/wp-json\/wp\/v2\/tags?post=28666"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}