Blog: How to Build a Demand Plan For Turbulent Times

Demand planning is crucial for any business that wants to meet its customer commitments, minimize excess inventory, and avoid supply chain disruptions. Demand plans are not new, but their importance and the need for ongoing reassessment of them is. Anyone in supply chain can tell you that flexibility and timeliness are now key to keeping pace with customer expectations.

With a flexible demand plan, companies optimize their operations based on today’s demand, not historical demand. And, supply chain optimization platforms like GAINS have made demand planning more accessible and actionable than ever, so it’s time for companies of all sizes to reap the benefits of a robust plan.

The Chartered Institute of Procurement and Supply (CIPS) defines demand planning as:

“The process within an organization which enables that organization to tailor its capacity, either production or service, to meet variations in demand or alternatively to manage the level of demand using marketing or supply chain management strategies to smooth out the peaks and troughs.”

By utilizing supply chain planning software and following best practices, businesses can design their operations to flex to meet service levels and maximize profitability, even when disruptions occur. To be most successful, today’s demand plans must rely on proven data-driven methods, involve all stakeholders, and create flexible plans that are continuously updated to align with real-time market conditions.

A new approach is needed to address uncertainty

The increasing uncertainty and volatile nature of supply and demand can make building a demand plan difficult. Keeping up with the demand for a product is critical because failing to do so results in lost revenue or, even worse, lost customers.

One of the goals of demand planning is to have just the right amount of inventory to meet customer demand without incurring shortages or wasting money on manufacturing and storing surplus inventory. However, when planning is in a static or unstable state, decision-making becomes a challenge. Uncertain lead times and fast-shifting demand combined with traditional long-term planning methods make the demand planning processes even more difficult. A different approach is needed. One that uses qualitative assumptions based on a variety of information and not just historical data.

Simulate and evaluate choices based on today’s environment

Utilizing GAINS’ Scenario Planning , businesses can make better decisions by using a decision matrix and other insights that identify variables that impact their demand plan. Users can easily simulate and evaluate how to best make changes to improve various aspects of their planning which are lacking.

GAINS has a variety of different modes which can be used for scenario and demand planning, providing ideas on how different types of information can improve planning.

The GAINS Demand Planning and Forecasting solution houses an extensive library of Key Performance Indicators (KPIs) as part of its scenario planning function.  These KPIs focus on revenue, demand planning, overall understanding of the supply plan, delayed revenue, or component shortages. These variables are intended to provide insights that empower users to run new simulations quickly, create additional comparisons to their baseline, and then display them in a quick, summarized fashion where they can be shared with and acted upon by other stakeholders.

You can also use GAINS Scenario Planning to drill down into any of the selected KPIs. This action provides different arrays of information to illustrate how those KPIs are affected over different time periods or by other scenarios. The data is displayed in a way that equips users with the data needed to examine different sales orders, which may be impacted based on any decisions.

Scenario planning must incorporate the capability to run different demand plans through the system to help better support the sales and operations planning (S&OP) processes and to improve planner productivity.

Better inventory decisions reached running scenarios

Using a demand planning and forecasting solution help users understand what a specific decision will cost them or how much revenue is at risk if customers place their orders elsewhere. The key is not just to identify the best-case scenario but also to provide visibility into the trade-offs associated with each decision.

Our customers load in specific events into GAINS and then run a scenario to see what impact it will have on the business. For example:  When signing a new customer who wants to place a new order for a thousand units, that’s not something built into the current forecast. Maybe the business has enough on-hand inventory to support the order. But, if not and the order is accepted, it means that there are a number of customer orders that must be changed. The inventory allocation based on your preexisting forecast is no longer relevant as demand has significantly changed. Used as a tactical tool, it can help planners make decisions from a customer service standpoint. Does it make sense to take on this new order, or it could be a situation where the business should negotiate a different delivery date for when there will be new supply.

If a business finds itself with an inventory surplus, it likely has no impact on existing orders; you can fulfill that order without thinking. Alternatively, suppose they have no on-hand inventory due to delivery issues with a supplier or transportation provider. In that case, they will likely want to see the impact on the P&L or service levels.  This is where the KPI metrics and scenario planning come into play. Planners can modify scenarios to discover the one with the metrics most aligned to business goals.  As a result of running the simulations, the full impact of taking that new order is understood.

Forecasting that aligns with inventory, lead times, and more

The GAINS forecast summary is a robust capability in GAINS Demand Planning. It allows users to take a deep dive and make aggregate-level adjustments or have them disaggregated proportionately into different items within unique populations for in-depth analysis. The solution allows for attaching other queries to support these in-depth reviews and dynamic grouping within the query itself. Any attribute pulled in from an ERP system, or something that is maintained in GAINS, can be used as a grouping within the forecast, such as:

•  Promotions

•  Budget Constraints

•  Sales Forecasts

•  Macro-Economic Impacts

•  Industry Segment Predictions

This forecasting capability allows users ultimate adaptability when making decisions based on their chosen factors; users can make aggregate-level adjustments or detail-level adjustments on specific SKULs or items, or make top-level adjustments. They can then examine variables to see what these changes look like over time and in the different phases throughout the scenario through simulations run in the scenario planning tool. Planners can then utilize that information to identify achievable revenue so that any inventory in stock between now and the end of the lead time is for the items currently being forecasted.

Accurate demand planning is a competitive advantage

Trusting a demand plan is more critical now than it has been in recent history, and GAINS provides accurate baseline forecasts to help optimize inventory and maximize return on assets. Its demand planning and forecasting capabilities include demand pattern recognition, machine learning, and automated multi-echelon modeling. Our sophisticated algorithms can be used for new item launches, maintenance applications, and incorporating leading indicator data into the demand planning process.

Here is a quick summary of some of the capabilities our customers rave about:

• GAINS has different modes which can be used for scenario planning, providing businesses with actionable ideas on how different types of information can be utilized to improve planning.

• The GAINS scenario planning solution can drill down into any chosen KPI to provide different arrays of information to illustrate how they are affected over different periods or other scenarios.

• The data is displayed so that users can examine different orders, which may be impacted based on decisions made in various areas.

• GAINS helps users understand how the decisions they make will potentially benefit the business or how much revenue is potentially at risk if customers go elsewhere.

For more information on demand planning, request a demo today.