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Dictionary / Demand planning

Demand planning

Last updated August 14, 2023

What is demand planning?

Demand planning is a supply chain management process. It’s the process used by businesses to predict what a company expects to sell in the future. The goal of demand planning is to ensure that a company has the right amount of inventory or resources available at the right time to meet customer needs while minimizing excess inventory or shortage.

Why is demand planning important?

Demand planning is important for businesses. Firstly, it empowers companies to assess their inventory and ensure an optimal quantity of products is positioned appropriately to proactively address customer demand. By enhancing planning processes, companies can adeptly manage inventory. Furthermore, demand planning serves as a safeguard against the pitfalls of excessive stockpiling. This includes the potential escalation of inventory carrying expenses, markdowns on products, or the necessity to rapidly liquidate unsold inventory through significant discounts. Such actions are undertaken to create space for the introduction of new products.

What is the difference between demand planning and supply planning?

Demand planning focuses on predicting customer demand, while deals with determining how to produce or procure to meet the demand, considering factors like inventory levels and production capacity.

What role does data play in demand planning?

Accurate and relevant data is crucial for demand planning. Historical sales data, customer behavior, market trends, and external factors help create more . Companies strive to improve accuracy by continuously refining their forecasting accuracy.