What are the most effective demand planning metrics for a global market?

1 Demand accuracy

Demand accuracy is the ratio of actual demand to forecasted demand. It indicates how well your demand planning process matches the reality of customer behavior and preferences. A high demand accuracy means that you are able to anticipate and meet customer needs without overstocking or understocking your inventory. A low demand accuracy means that you are either missing sales opportunities or wasting resources on excess inventory. Demand accuracy can be measured at different levels of granularity, such as product, category, channel, or region. By tracking demand accuracy across different dimensions, you can identify the sources of forecast errors and improve your demand planning methods.

2 Inventory turnover

Inventory turnover is the number of times that your inventory is sold and replaced in a given period. It measures how efficiently you are using your inventory to generate sales. A high inventory turnover means that you are selling your products quickly and minimizing the risk of obsolescence, spoilage, or depreciation. A low inventory turnover means that you are holding too much inventory that is not moving or generating revenue. Inventory turnover can be influenced by factors such as demand variability, lead times, replenishment frequency, and pricing strategies. By monitoring inventory turnover, you can adjust your inventory levels and policies to balance service levels and costs.

3 Fill rate

Fill rate is the percentage of customer orders that are fulfilled from available inventory. It measures how well you are meeting customer expectations and delivering on your service promises. A high fill rate means that you are able to satisfy customer demand without backorders or delays. A low fill rate means that you are losing sales and customer loyalty due to stockouts or long lead times. Fill rate can be calculated in different ways, such as line fill rate, order fill rate, or case fill rate, depending on the unit of measurement and the level of aggregation. By improving fill rate, you can enhance customer satisfaction and retention.

4 Forecast bias

Forecast bias is the tendency of your demand forecasts to be consistently higher or lower than the actual demand. It indicates how objective and accurate your demand planning process is. A positive forecast bias means that you are overestimating demand and creating excess inventory. A negative forecast bias means that you are underestimating demand and creating stockouts. Forecast bias can be caused by factors such as data quality, historical trends, market conditions, or human judgment. By detecting and correcting forecast bias, you can improve your demand accuracy and inventory efficiency.

5 Planning cycle time

Planning cycle time is the time it takes to complete a demand planning cycle, from data collection to forecast generation to plan execution. It measures how agile and responsive your demand planning process is. A short planning cycle time means that you are able to update your demand forecasts and plans frequently and adapt to changing market conditions. A long planning cycle time means that you are using outdated or irrelevant data and plans that may not reflect customer demand. Planning cycle time can be affected by factors such as data availability, forecast frequency, planning methodology, and organizational coordination. By reducing planning cycle time, you can increase your demand visibility and flexibility.

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?