When you have labored in Gross sales Planning or Operations Planning, you have got heard the phrases “demand forecasting” and “demand planning” typically utilized in your office. Chances are you’ll even have heard these two phrases used mutually; nevertheless, these two ideas aren’t equal. It is very important know the distinction between the 2 to offer the proper context and keep away from any confusion in your subsequent provide chain administration assembly.
What’s Demand Forecasting?
Forecasting is, to place it merely, a prediction of occasions which can be but to occur. Demand forecasting, then, is the method of predicting future demand ranges over a sure time frame. That is achieved through the use of historic information and data, corresponding to charts, statistics, and different analyses. By predicting the demand degree, companies can then make extra knowledgeable selections for his or her success.
Why is Demand Forecasting Necessary?
Correct demand forecasting is helpful in a couple of alternative ways. First, having an correct prediction of demand ranges can enable a enterprise to higher plan and schedule the manufacturing of their items or providers. As an example, a chilly medication producer can schedule the making of extra of its medication in order that it will likely be on retailer cabinets by the point the chilly season rolls round. This firm has used demand forecasting to extra correctly produce its medication.
Which means this firm may also lower your expenses via its demand forecasting. Not solely does a peak season imply a rise in gross sales, however with demand forecasting, the corporate may finances higher for elements like suppliers and holding prices. Foretelling demand ranges may let a enterprise know when they should enhance assets, corresponding to workers and gear, in order that the corporate can proceed to run easily.
What’s Demand Planning?
Why is Demand Planning Important?
Successful demand planning is the ultimate plan from the very beginning stages of demand forecasting. If it is done correctly and effectively, demand planning can help the company make a better profit and can also help improve customer relations. By successfully planning for fluctuating demand levels, a company can optimize its inventory levels and staff and equipment availability. These are factors that customers not only notice but also appreciate. Customers will be excited when a company has planned accordingly for an increase in demand. That means that they can count on their favorite products still being on the shelves.
Long story short, though the terms “demand planning” and “demand forecasting” are often used interchangeably, they are not equal. Demand planning is the process that takes place after the demand forecasting has been completed. The results of demand forecasting will decide the method of demand planning. These two things are indeed closely related, but they are not synonymous.
