Demand Planning : for better customer satisfaction

Good inventory management is essential in a business to meet customer demand. It is also essential to maintain a balance between supply and demand for this, companies are obliged to have enough products and means of distribution.

Good inventory management is essential in a business to meet customer demand. It is also essential to maintain a balance between supply and demand for this, companies are obliged to have enough products and means of distribution.

 Demand planning allows you to optimize customer satisfaction.

What is demand planning ?

Demand planning makes it possible to maintain an optimal level of stocks so as not to over-stock and lose productivity, but also to meet customer demand. It is the heart of the logistics chain.

Companies are required to estimate sales to organize their production of goods, warehouse storage operations and the final budget. All departments whether sales, marketing, sales, finance, or logistics must work together for this estimate.

 With the help of this estimate, productions and commercial actions are put in place.

Warehouse demand planning

This allows you to :

·       Determine the quantity of products to be stored per SKU,

·       Determine the necessary storage space for items,

·       Determine the number of operators and teams required,

·       Secure stocks and avoid all errors and service interruptions.

The benefits of demand planning

·       Customer satisfaction to increase the visibility and image of the company: with optimal stock and demand planning allows companies to have the right product at the right time and therefore satisfy any customer.

·       Organize production: estimating the number of sales makes it possible to anticipate production and needs (picking, packaging, deliveries).

·       Reduction of dead and obsolete stocks: the products necessary to meet customer demand are stored. There is therefore no dead stock which increases costs, nor too low a stock of product.

·       Optimize storage and space: only the necessary products are stored, which considerably reduces storage space.

·       Reduce and minimize costs: Estimating sales allows companies to plan their budgets and therefore not spend for nothing and have control over their spending.

Demand estimate

Estimating demand is a time consuming and not that easy process. In fact, it is impossible to determine 100% of demand and customer needs, especially as some products are seasonal.

Other products are trending, that is, they are popular at one time but completely forgotten at another.

For a precise estimate of demand, companies can estimate and analyze changes in relation to historical data of sales and requests made.

·       Per month,

·       By quarter,

·       Per year.

Businesses analyzes

·       Orders placed,

·       Deliveries / receptions and sales of products,

·       Potential customers,

·       The market situation (national and international depending on socio-professional, economic, technological factors) which impacts sales,

·       Business strategies (decisive).

Calculate the forecast demand

There are two methods to calculate demand :

1.     Quantitative

Based on data from previous years to calculate forecast demand and manage stocks

There are 3 principles of action for this:

·       The naive method: takes the sales history but does not assess the market trend: sales remain constant. This method seems to be unrealistic.

·       Average method: calculate the average sales over a short period.

2.     Qualitative

This method is used when new products are introduced in a company or launched in the market. This study is the most reliable since it includes a study of the market but also of the potential customers, the "computer traffic, the behavior and the habits of the customers.