You can't measure what you can't see: planning or demand management?
Over the past two years, the supply chain has been challenged by unprecedented events: from a virus that paralyzed the world to extreme weather conditions, not to mention everyday threats. Matching resources with available capabilities, opportunities, and the challenges of unpredictability is, therefore, a must for any company today.
Hence, demand planning has been created as a continuous process that evolved along with technological advances, which has facilitated sales analysis, early detection of trends influencing consumers, and historical sales to optimize a company's capacity to meet customer demand more effectively.
Demand planning combines sales forecasting, supply chain management, and inventory management to achieve this goal. First, it uses data from internal and external sources to forecast future demand. That forecast is used to create sales and operations strategy and, in turn, to project how much product to buy or manufacture to meet that demand.
Effective planning helps companies find the right balance between sufficient inventory levels and customer demand. That's not an easy goal, especially since it requires coordination across the organization. But the business implications are significant. Excess inventory ties up working capital, adds handling costs, and increases the chance of being left with low-value or obsolete inventory.
Alternatively, poor planning can lead to avoidable supply chain disruptions and leave the company without products, which can result in backorders, stock-outs, or expensive raw material problems. All of these situations can cause delays, resulting in dissatisfied customers.
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What is the solution?
?Demand management is similar to demand planning since both processes attempt to balance supply and demand within the manufacturing operation. However, demand management goes beyond simple planning.
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?This process is comprised of four elements that will ensure that production facilities can meet incoming demand based on their current capacity:
While planning is an important aspect of demand management, manufacturing facilities will see better results when they communicate the demand plan, so that all departments are aligned. They may also want to shape demand through marketing and sales activities.
On the other hand, the prioritization element of demand management involves determining which products or customers should be prioritized when capacity is limited.
?Demand management processes put together supply and demand to optimize decision making, ensure that production/inventory costs are minimized, and maximize revenue. In other words, demand management monitors the current state of customer demand and ensures that the production facility does not experience shortages or other profit-losing activity.
?The good news is that advances in technology have made demand management less complex and easier to understand. Some even automatically generate forecasts based on sales order history for specific items. They can also quickly integrate with ERP/MRP software, maximize resource performance, and enable data-driven decision-making for different scenarios.
?Implementing a demand management solution will take your manufacturing operations to the next level of production efficiency by leveraging the technology and operational data you already have. If and when it is implemented by experts, not only in the technology field but with experience in your industry, your processes, and human subject issues.
You can't measure what you can't see; talk to our specialists and find out how to boost your business.