The Different Aspects of Demand Planning for Distributors

While there are several factors that affect the health of your supply chain, one of the most important is demand planning.

What is Demand Planning?

Demand planning, which includes the practice of sales forecasting, helps you to order the right amount of goods for a given time period. It also helps you to excel at supply chain management, which can help you reduce inventory holding costs, eliminate waste and improve operations planning. A carefully executed demand planning process will improve your supply chain management and help you better plan for future demand.

How to Implement Demand Forecasting

To help you achieve forecast accuracy, the following methods will aid you in your demand planning process.

1. Review Historical Data

By reviewing historical sales data for a specific time period, one can predict with a fair amount of accuracy how much sales can be expected in the same time of the year to come. Things like seasonal rushes, holidays or summer vacations can have an annual impact on your sales that is likely to occur year after year. Be sure to look at the last few years, if possible, as that will give you a healthy average versus one year of data. You should be able to tap into your wholesale inventory software so that you can view prior year sales data and customer demand.

2. Consider Planned Events or Promotions

Especially for new products that you have no historical data on, you'll need to consider planned annual events or holidays that could have an impact on your inventory levels in general. For example, you might hold an annual sale outside of a holiday that could cause an immediate spark in orders. Be sure to discuss annual events and shore up inventory prior to that event or holiday to be prepared.

3. Review Your Sales Team's Forecast

Your order tracking software should also allow your sales team to forecast sales they expect from customers. By using this demand management tool, your sales team can help you predict sales for the coming quarter. This gives you time to place orders with your suppliers so that you have the right stock on hand for future business. Combine this tactic with the aforementioned and you'll have an even more accurate forecast.

4. Consensus Planning

While you could use one or several of the aforementioned tools, it's the combination of all three that make it consensus planning. It isn't something that can be accomplished with a few reports and a click of a button, it requires a group effort on behalf of your sales, marketing and inventory management teams. By reviewing your historical data, planned events and the sales team's forecast, a sound judgement call can be made by committee or by an individual for supplier orders that should be placed to satisfy potential demand.

Whether you employ one or more of the above tactics, know that this process requires input from several teams and depends on how engaged everyone is in the process. Kick it all off with a meeting with involved parties and stress the importance of why a successful demand planning program is necessary. Use an automated inventory management system in combination with your demand planning tools and you'll reduce the chances of excess inventory or stockouts. The more accurate the forecast, the happier your customers will be.

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