What is demand planning?

Discover the first part of our Demand Planning series, written by Nicolas Commare, CEO of Colibri.

Demand planning is a strategic process for companies facing inventory and replenishment issues. In this new series we will discuss different thematic around Demand Planning.

So, to start this series we thought that the first question to answer should be: What is demand planning? More precisely, what is the difference between Demand planning and Sales forecasting?

From a general point of view, you can get a first answer just by looking at the words:

  • Sales forecasting means trying to estimate the sales coming from the customers
  • Demand planning means trying to understand and master the market needs while setting the organization to efficiently answer those needs.

If you want to go further, you need to ask yourself the following question: do you only want to forecast your demand, or, do you want to organize your team to provide the adapted answers to the market needs?

To plan the demand, you must master it. This kind of control needs visibility of real demand, lead times reduction and to be able to deliver customers’ orders according to quantities, qualities and due dates.

Thanks to the customer-seller relationship, the customer service rate can be optimized without raising the safety stocks and transport costs. When this level is reached, there will be no need to mitigate your decision between service and costs as both targets will now be reached simultaneously.

The demand analysis and order management must be at the center of the activity and if conducted properly they offer efficiency within the company.

The key indicators to follow are the customer service rate, sales forecasts reliability, and customers order execution.

Nicolas Commare, CEO of Colibri.