Demand Planning: The First Step In Supply Chain Planning

Demand Planning: The first step in Supply Chain planning

Demand planning or sales forecasting is one most important aspect of any organization whether it is a services or a manufacturing organization. A services organization would be estimating the demand for the services and thereby gearing itself up to service the demand for its services. A manufacturing organization would be estimating the demand for its manufactured goods and hence would be working towards whole lot of activities like supply of raw materials, production capacity, distribution etc. Demand planning plays a very strategic role in any organization as the planning for whole lot of other activities depends on the accuracy and validity of this exercise. For example Sales and

There are various statistical forecasting models each of them catering to different behavioral patterns shown by products and markets. The univariate models, linear models, the multivariate linear and non linear models, seasonal models, Croston’s model, mixed model etc. The list is virtually endless. They may look like small words but selecting an appropriate model for each of the products in the portfolio could be a time consuming and intricate task. There are no short cuts for this. A detailed simulation exercise needs to be carried out to select the best model for a product and market. The statistical forecasting models need to be continuously tested and refined. This means the demand planning tool should also support a simulation environment and also the ability to compare different forecasting models. Depending on the way the data is stored in the demand planning tool; statistical forecasting can be done at various levels. There can be a top down approach or a bottom up approach. A top down approach means carrying on statistical forecasting at the highest level and then breaking it down, the bottom up approach means the vise versa.

Consensus planning: The demand planning tool should support consensus planning features since demand planning is rarely the work a single person from a single department. Demand planning often is a collaborative exercise between different departments

Demand forecasting and planning is the very first step in most of the planning cycles in an organization. Any errors that creep into the numbers at this point have a ripple effect later on which only gets amplified. This phenomenon is popularly known as the Bullwhip effect in supply chain. With the ever changing nature of the environment that an organization is operating in along with shortening product lifecycles and other competitive pressures it is imperative to have a demand planning tool which should be able to handle the complexities of the business not only today but also be scalable for the future needs as an organization