Supply Chain Management – Understanding Demand Planning
Bridging Supply and Demand Side Management to Optimize Decision Making
With its name focusing on the supply side, it is easy to forget that supply chain management refers to managing both supply and demand. The supply side lends itself well to direct influence and control by supply chain managers. Those same managers, though, may feel that demand is outside of their control.
Successful supply chain management requires organizations to bridge the supply and demand sides. Bringing the two sides together allows for optimal business decisions.
Supply-side Management – Minimizing Costs and Inventory
The supply side of supply chain management entails implementing processes to ensure that products are available when customers need them. Successful management also involves minimizing costs associated with carrying inventory, purchasing materials, and shipping.
To meet customer needs, an organization may use a mix of strategies, such as maintaining excess inventory, make-to-order, or buy-to-order. This requires granular coordination and constant communication between areas such as:
- Supply Chain
- Merchandize Planning
Demand-side Management – Maximizing Revenue and Margins
Supply chain managers may believe that they have little influence over the level of demand from customers, as demand generation is the domain of marketing and sales. However, the demand side of supply chain management can have as significant an effect on profitability as the supply side.
A sufficiently deep understanding of customer buying patterns can reveal opportunities to maximize revenue and margins. Gaining that customer insight requires input from:
- Customer Service
Matching Supply and Demand
Bridging the domains of supply and demand provides opportunities to reduce costs and increase revenue and margins. For example, examining a particular customer may show that the customer has a pattern of ordering at relatively longer, monthly intervals. Each order requires you to scramble for a subset of materials from your suppliers.
Engaging with the customer and incentivizing them to place orders at more frequent intervals effectively increases your delivery lead-time. This allows you to reduce costs by avoiding expedite fees from suppliers and by identifying less-costly and slower shipping methods.
Demand Planning Versus Supply Planning
The desired outcome of demand planning and supply planning is that the forecasted demand for your product or service and the actual demand for your product and service align perfectly. In practice, that rarely happens. QueBIT applies sophisticated analytics to both processes, though, that helps bring actuals and forecasts as close together as possible.
Demand planning is the process of understanding your customers in the context of their purchasing patterns and preferences. QueBIT enables this understanding by applying sophisticated analytics to all available data on customer purchases.
Within supply chain management, demand planning subsumes a large set of activities. These include:
- Inventory Planning
- Production Planning
- Production Scheduling
- Procurement Planning
- Performance Measurements and Methods
- Decision Making Optimization
Supply planning is the process of identifying the most cost-effective means of delivering products to customers based on their known preferences. This requires working proactively with retailers, distributors, and other channels.