How can you reduce supply chain costs with demand planning?

1 What is demand planning?

Demand planning is the process of forecasting the future demand for your products or services based on historical data, market trends, customer feedback, and other factors. Demand planning helps you align your production, distribution, and marketing strategies with the expected demand patterns and avoid overstocking or understocking. Demand planning is a key component of supply chain management and can help you improve your operational efficiency, cash flow, and customer loyalty.

2 Why is demand planning important for e-commerce?

E-commerce businesses face a unique combination of challenges and opportunities when managing their supply chains. These businesses have the potential to reach a global market and provide customers with a wide variety of products and services, but they must also contend with high competition, fast-changing customer preferences, and unpredictable demand fluctuations. Demand planning can help e-commerce businesses address these issues and gain a competitive advantage. It can reduce inventory costs by accurately predicting the demand for each product or service, resulting in lower storage, handling, and obsolescence costs. Additionally, it can increase sales and revenue by ensuring there is enough stock to fulfill customer orders and avoid stockouts. Furthermore, it can enhance customer satisfaction by delivering products or services on time and in good condition. Finally, analyzing demand trends and patterns can help identify opportunities and threats in the market so that the value proposition can be adjusted accordingly.

3 How to do demand planning for e-commerce?

Demand planning is a continuous cycle of collecting, analyzing, and updating data and information. To do demand planning for your e-commerce business, you should begin by setting objectives and metrics to measure and improve key performance indicators (KPIs). Next, you should gather and organize your data sources that can help you forecast demand, such as historical sales data, customer feedback, market research, competitor analysis, seasonality, promotions, and events. You should also choose the forecasting method that best suits your data and objectives, such as qualitative, quantitative, causal or machine learning. After generating your forecast, it’s important to validate and communicate it to stakeholders. You should also monitor and update your forecast regularly and adjust your supply chain accordingly by tracking actual demand and comparing it with your forecast.

4 What are the benefits of demand planning for e-commerce?

Demand planning can bring many benefits to your e-commerce business, such as lower supply chain costs, higher customer satisfaction, better decision making, and more agility and flexibility. By optimizing inventory levels and reducing wastage and inefficiency, you can save money on supply chain operations and increase your profit margin. Additionally, fulfilling customer orders on time and in good condition can lead to enhanced customer satisfaction and loyalty, as well as reduced churn rate. With a clear and accurate view of demand and supply, you can make better and faster decisions on product development, pricing, marketing, and distribution strategies. Moreover, anticipating and adapting to changes in demand and supply allows for quicker responses to opportunities and threats in the market and environment, enabling resilience and growth.

5 How to improve your demand planning skills for e-commerce?

Demand planning is a complex and dynamic process that requires a combination of skills, tools, and techniques to improve your e-commerce business. Utilizing the expertise of other successful e-commerce businesses or mentors can prove beneficial. Additionally, the use of technology and software can help automate and streamline the demand planning process. Spreadsheets, dashboards, analytics, and artificial intelligence can be used to collect, organize, analyze, and visualize data. To stay ahead of the competition, it is important to keep learning and improving by keeping up with the latest trends in the e-commerce and supply chain fields. Regularly reviewing and evaluating your demand planning process and results can help identify areas for improvement or innovation.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?