What is the difference between demand forecasting and inventory planning?

You may come across the terms inventory planning and demand forecasting synonymously in the workplace. While the two terms are closely related and have a lot of overlap, they are not the same.

Understanding the small distinctions between the two will help you keep your business running efficiently, ensuring you have the correct amount of inventory, and plan for future expansion. So, if you have ever been perplexed by the two names or believed they were in fact the same thing, here's what you need to know.

Demand forecasting is a prediction, to put it as simply as possible.

To forecast how much will be sold in the following weeks and months, a company will look at prior trends, seasonal demand, customer expectations, upcoming marketing initiatives, and market research.

Inventory and stock levels are only a small part of demand forecasting.

This forecast will be used to estimate the marketing budget, supply levels, and the number of personnel required each day, among other things.

The demand projection will serve as the foundation for a company plan that will meet demand while also increasing profitability.

Consider demand forecasting as a proactive measure.

Inventory planning

Inventory planning, on the other hand, is far more reactive.

Demand, warehouse space, additional storage costs, returns and resales, build-time, shipment time, and other factors must all be considered.

Inventory planning is far more realistic, as it considers how a product is manufactured, transported, stored, and sold in the actual world.

Forecasting and planning that works

Every business engages in forecasting and planning to some extent.

The sole question is how thorough and efficient a company is.

Because so much of inventory planning and stock management is dependent on accurate demand forecasting, many businesses prefer to concentrate their resources in this area.

However, this can lead to improper inventory planning, resulting in production errors, storage challenges, and a shortage of stock.

On the other hand, some companies spend a lot of money on forecasting yet end up with faulty results due to a lack of focus or the use of the wrong technologies.

This can have an influence on inventory planning since it becomes impossible to plan for unforeseeable events and demand variations.

For a business to run smoothly and meet client requests, it requires both effective forecasting and planning.

The importance of accurate forecasting and planning

Because so much depends on accurate demand forecasting and inventory planning, it is critical to use the correct tools and get it right.

A simple error can have a long-term impact on all aspects of a company.

Data is the foundation for both projecting demand and planning future inventory.

Software that collects, stores, and analyses data, such as sales, seasonal trends, returns, market demand, and stock levels, is the ideal solution.

The better knowledge and historical data a company has, the more prepared it can be.

Businesses can easily get both demand forecasting and inventory planning right every time by automating the process and relying on algorithms to create accurate projections.

Please contact us to learn more about how StockTrim can supply you with accurate statistics and help you plan for a better future.