Blog: Why Supply Chain Scenario Planning is Vital to Your Demand Plan

Demand planning is crucial for any business that wants to meet customer demand and service levels while minimizing excess inventory and avoiding supply chain disruptions. With a demand plan, companies can optimize their operations to become more profitable and efficient while improving customer satisfaction. Supply chain optimization platforms make demand planning more accessible than ever, which is excellent news for any business.

The Chartered Institute of Procurement and Supply (CIPS) describes 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 some best practices, businesses can optimize their demand planning process and become more efficient, effective, and profitable. Demand planning is a cross-functional process with best practices that use proven data-driven methods, involve all stakeholders, and create flexible plans to accommodate today’s rapidly shifting environment.

Addressing uncertainty

Today’s increasingly volatile nature of supply and demand can make building a demand plan difficult. Keeping up with the need for a product is critical because failing to do so can result in lost revenue or, even worse, lost customers. One of the main goals of demand planning is to have just the right amount of inventory to meet customer demand without incurring shortages or wasting money on making and storing surplus inventory. However, when demand is in an 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.

Using GAINS to get it right

Utilizing the GAINS Scenario Planning solution, companies can make decisions using a decision matrix and identify variables that may impact their demand plan. Users can easily simulate and evaluate how to best make changes to improve the aspects of their planning which are lacking. GAINS has a variety of different modes which can be used for scenario and demand planning, providing you with ideas on how different types of information can be utilized to improve your planning.

The GAINS Demand Planning and Forecasting solution houses an extensive library of common Key Performance Indicators (KPIs) as part of its scenario planning function, including metrics that focus on:

  • Revenue
  • Demand planning
  • Overall understanding of the supply plan
  • Delayed revenue
  • Component shortages

These variables are intended to provide something you can use to run different simulations quickly, create additional comparisons to your baseline, and then display them in a quick, summarized fashion where you can share them with other stakeholders.

You can also use the GAINS Scenario Planning solution to drill down further into any of the selected KPIs to provide different arrays of information. This insight empowers planners to illustrate how those KPIs are affected over different time periods or by other scenarios. The data is displayed in the tool so that users can examine the different sales orders, which may be impacted based on the decisions made in various areas. GAINS felt it was essential for its scenario planning offering to incorporate the capability to run different demand plans through the system to better support the sales and operations planning (S&OP) processes and to improve planner productivity.

Better realizing the cost of your decisions

The Demand Planning and Forecasting solution is designed to 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 to identify the best-case scenario and provide visibility into some of the trade-offs associated with your decisions.

One of the ways that GAINS can be used is to load in specific events and then run a scenario to see what impact it will have on the business.

For example:  When you bring on a new customer who wants to place a new order for a thousand units, that’s not something you will have built into your current forecast. Maybe you have enough on-hand inventory to support the order. But, if not, and you take that order today, it means that there are some customer orders you have planned that inventory for based on your preexisting forecast that will not be filled because that inventory’s no longer available. 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 could it be a situation where the business should negotiate with that customer for when you can supply it?

If you find yourself with an inventory surplus, it might have no impact on your existing orders; you can place that order without thinking. Still, suppose you have no or limited on-hand inventory (issues with a supplier or transportation provider). In that case, you’ll likely want to see the impact on your business or service levels. This situation is where the KPI metrics come into play. You can modify the scenario for the metrics that are most important for you. As a result, you can see the impact of taking that new order.

Detailed forecasting in GAINS

A forecast summary is part of the GAINS Demand Planning solution. It allows users to take a deep dive and make aggregate-level adjustments. They can be disaggregated proportionately into different items within different populations for more in-depth analyses. GAINS allows for attaching other queries to support these in-depth reviews and dynamic grouping within the query itself. So, attributes pulled in from an ERP system or something that is maintained in GAINS can be used as a forecast grouping, such as:

•             Promotions

•             Budget constraints

•             Sales forecasts

•             Macro-economic impacts

•             Industry segment predictions

 These insights allow users ultimate adaptability when making specific decisions based on their chosen factors; users can make aggregate level adjustments or detail level adjustments on specific SKULs or items or top-level adjustments. Users 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 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.

More critical than ever

Accurate demand planning is more critical now than 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 (ML), 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 are just a few benefits that our demand planning customers rave about:

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

• GAINS scenario planning 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 you chose.

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

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