When a business sells a product or service, the laws of supply and demand dictate success. After all, a business can have the best product in the world, but if there is no demand for that product, then it won’t sell.
Worse yet, a company may have anticipated the demand, and they may have preemptively purchased too much inventory. With a major cost investment and no sales to be had, a business will quickly go under.
Therefore, utilizing demand planning software can be a great way to ensure that the above does not happen. Some businesses may have heard of this term before, whereas it may be completely new for others. Learn everything there is to know about demand planning software and how it can help an organization.
What is Demand Planning Software?
Demand planning software may confuse those who have never heard the term, but it is a simple concept. This software allows businesses to optimize their inventory levels, production, and distribution, by analyzing historical demand trends to predict current and future demand. This can be used to find the optimal time for sales, new product launches, brand promotions, etc.
Currently, one of the places where the majority of a businesses’ money is tied up is inventory, specifically due to the over purchase of inventory resulting from erroneous demand predictions.
Demand planning can help increase a company’s profitability, all while boosting the satisfaction customers feel. Additionally, demand planning helps to streamline the production process within your organization to bolster inventory management, which saves a business both time and money.
How Demand Planning Software Benefits Businesses
Beyond the reasons why demand planning matters, there are five primary benefits to using demand planning software for your demand forecasting needs. These include:
Supply chain optimization
One of the primary benefits of demand planning software is that it gives insight into the inner workings of an organization’s supply chain. Whether it be the amount of time inventory spends sitting on the shelves or even how long it takes to package that inventory, demand planning software can give a business actionable insight into its supply chain.
Reducing supplies in storage
Should a business notice through demand planning software that a large amount of its inventory sits in storage, it can adjust its sales strategy to better account for demand. Not only is inventory in storage not being sold, but it also takes up space that the company pays for. Optimizing demand forecasts can increase inventory turnover and specific storage spaces may no longer be needed.
Real-time adjustments based on data
Perhaps one of the most significant benefits of demand planning software is the fact that an organization can make real-time adjustments to its supply chain. By receiving specific data from software, a business can see what works and what doesn’t within their organization. Depending on the situation, this can then be used to halt further purchases or order more.
The prevention of stockout
Stockout occurs when demand far exceeds a company’s inventory levels, which is particularly frustrating because you know customers want your product but can’t provide it. Stockout costs companies billions annually, but such software can reduce these losses.
Overall cost savings
Finally, the software provides businesses with overall savings on their costs. Whether it be not over-ordering inventory, reducing the time inventory sits on a shelf, accurately predicting when discounts should be provided to products, or something else entirely, demand planning software can bolster business savings.
Tips for Accurately Forecasting Demand
While predicting demand with complete certainty is impossible, demand planning software can get quite close. On top of this, it’s beneficial to learn some general tips for forecasting demand:
- Use data-driven forecasting techniques based on a similar period;
- Select correct error measurement methods to account for human error;
- Train employees to report trends they’re seeing;
- Use point-of-sale customer order data for short-term demand purposes.
Stay on top of your organization’s production
Staying on top of supply and demand is a significant key to success for any business, regardless of the field. However, demand constantly ebbs and flows based on several factors out of a business’s control. Therefore, the best way to match supply to demand is to utilize demand planning software to predict your organization’s demand forecasts accurately.