Demand planning is an important part of the supply chain management process. As we have discussed in other articles, supply chain management is the act of optimizing the production line of a company so that products can arrive where they need to be at the designated time without any warehouse or store location having to worry about over stocking products that wont sell or being sold out of products that are consistently selling at a high rate.
Like sales forecasting, demand planning is part of the supply chain management suite and focuses more on the production of SKUs as opposed to simply the sales or costs associated. Demand planning is one of the many ways that company can ultimately optimize their budget through the cutting of costs and increasing of revenue.
Because of the massive costs that demand planning can produce, as well as the revenue boost, there has been a rise of demand planning software companies. Demand, or supply planning software, companies aim to make the implementation and optimization of the demand planning process simple. A demand planning software solution will usually be coupled with a business forecasting software or sales forecasting software solution.
The best demand planning software systems use the forecast to then create both purchase orders and a purchasing schedule. The forecast is usually also generated using software that is able to predict the upcoming demand using a series of complex algorithms that identify trends in your historical sales data. The system then assigns what it identifies as the most accurate algorithm depending on the trends of the data, accounting for seasonality and other trends, and generates a forecast.
A demand planner can then use the demand planning software to create reports, collaborate with suppliers, collaborate with other demand planners, see a visual representation of the upcoming demand plan, and make adjustments as necessary. The system will make recommendations to your team as to what it believes will be the most effective plan for your inventory. It will even suggest that you take items that you have stocked over at one location and suggest that you move them to a location where those same items may be understocked.
Of course, the expertise that comes with being able to perform the job is important and so, while it gives you the freedom to decide the proper course of action with helpful suggestions based on a sales forecast and current trends, you are ultimately the decision maker and can adjust and create changes to your plan at any time within the demand planning software system.
Supply planning software also allows you to plan at any level on the SKU hierarchy. Not only does the system suggest basic categories needed for planning purposes, but it allows you to integrate directly with your ERP system and include any custom categories that just makes sense for your business model. For example, if you were a retail clothing store, you may want to include some categories along the lines of color, material, size, etc. If you were an auto-shop you may want to sort parts by make, model, type, etc. This way, you can make planning for any type of product, category, or business model is extremely easy and possible. This is also one of the many reasons that demand planning software is versatile and can be utilized in virtually any industry, even those outside of the retail bubble.
Demand and supply planning software can also be used to set up a foundation for Sales and Operation Planning software. S&OP software is the next step in the supply chain management software suite. It can be utilized for collaboration across the multiple departments in the company, including those that use sales forecasting software and demand planning software. The value of collaboration across these departments can often be overlooked when marketers push a product that is always sold out or operations keep producing a product that no longer has the interest of the public. This sort of collaborative system can take a lot of heat and work off of an operations department and allow seamless collaboration within a company with one system that everybody can peer into.
Now that you have an idea of what demand planning software is and how you can apply it to your business model, there are a few more factors to consider when selecting a system that is going to work for you. Implementation of a demand and supply planning software system can be expensive because it presents the opportunity to pay for itself in costs saved and revenue generated. When making the investment, taking your time can be important so that you ensure you have found the best demand planning software out there for you.
Every system tends to be slightly different, be sure to ask for a demo and see what features the system has so you can be sure to meet the requirements of all who will potentially use the system in your company. It is also equally as important to select a software company that will grow with you. If you are not yet at the stage where you have to upgrade from spreadsheets to an entire supply chain management system, you may want to find a solution that covers business forecasting software for now, and that will give you the opportunity to supply planning software and other software systems within the supply chain bubble later on. This type of company ensures that you will be well taken care of no matter what size you ultimately scale up or scale down to.
It is also important to find a company that values an accurate sales forecast. The more algorithms involved in forecasting, the more accurate the system will be. Accuracy is extremely important for supply planning software because it provides the upcoming demand that the generated plan is based on, which can also negatively affect a capacity planning system or S&OP system if the forecast is not accurate. We recommend you take a look at Avercast, with over 200 forecasting algorithms and the opportunity to demo the system extensively before you buy, you can be sure to find a demand planning software solution that fits your needs! Sign up for a demo today and see what we can do for you!