Because many decisions in a supply chain must be taken prior to the point in time when the customer demand becomes known, Kilger and Wagner emphasize the importance of Demand Planning – or, “the process of forecasting future customer demand” (Kilger, Wagner, 2008). Read William Malsam’s post about demand planning at the link below – then return and describe your framework for demand planning in the comment section of this article.

Businesses are constantly pulled between supply and demand. But this seemingly simple concept can be difficult to navigate effectively.

How do you meet demand and not overstock your inventory? That’s where a process called demand planning comes in. It’s a way to boost profits and keep overhead costs down.

What Is Demand Planning?

Demand planning is a cross-functional process that businesses use to meet customer demand while avoiding supply chain or inventory management disruptions. Demand planning is not a one-time process but rather is practiced continuously to respond to the market. This is accomplished by analyzing a company’s sales, customer trends, historical sales and seasonal data.

You must use both internal and external research to determine the demand forecast for your product. Demand can be impacted by labor force changes, economic shifts, severe weather, natural disasters, global crises and more. It’s not easy to estimate demand, but the more factors you consider, the more accurate your demand forecasting will be.

Once that is done, you can adjust sales and production planning to manufacture just the amount needed. Ideally, you’ll have sufficient inventory to meet your customer’s needs without a surplus. That’s beneficial for your business’ supply chain management and inventory management.

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Kilger C., Wagner M. (2008) Demand Planning. In: Stadtler H., Kilger C. (eds) Supply Chain Management and Advanced Planning. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-74512-9_8