Forecasting and Demand Planning Tie into Sales and Operations Planning

To maximize profits is the goal of a business.So how do we accomplish this goal from a supply chain perspective? Let us analyze the main aspects of how supply chain planning can contribute to the company’s goals.

We know the importance of demand planning which is to ensure timely, cost effective and efficient operations.We also want to make sure that product is available to maximize marketplace revenues. A variety of information is required in demand planning in other to forecast the demand of the products we sell. The objective is to give useful information for the Sales and Operations Planning (s&op) in other to ensure that demand is planned properly.

“Demand planning is can be frustrating and most misunderstood of any application of SCP” as noted by Supply Chain Insights. The following aspects are important to the success of our demand planning.

Our products demand should be understood

There may be dependent demand, inter/intra plant demand, demand for service parts and independent demand for any given product. Usually, we are forecasting service parts and possibly independent demand but we have to plan all demand types in our supply chain processes so that availability can be ensured.

Demand volatility of one of the main points. Generally, the more knowledgeable we are about the demand for our goods and services, the better our predictions will be. For instance, the demand volatility is created by the bullwhip when it is moving via the supply chain.

You should understand the meaning of Demand Planning

The use of experience and forecast to estimate for various products at various points in the chain of supply is known as demand planning. Generally, who does the predictions, what products are we dealing with, in their life cycle, where are they, how does their demand pattern looks like, do we comprehend the market volatility, & who is disseminating the required additional information so that appropriate forecast is ensured? Of course, there may be more questions that require answers depending on the particular company.

For example, a firm that over forecast a lot of large product lines consistently which leads to lower inventory turn and increased inventories. While the firm might or might not see this as an issue, the demand planning enables one to understand what should be the inventory objectives, and also what should be the suitable forecast via ongoing analysis.

Understand how Forecasting and Demand Planning Tie into Sales and Operations Planning

Forecasting and demand planning work hand in hand. So to provide value, they must be incorporated into other operation aspects.Sales and Operations Planning is among these processes.  Sales and Operations planning is defined as “a process which ispoised on ensuring a continuous alignment btwsupply, demand, manufacturing, and inventory plans on one hand, and btw these strategic plans and the business plan on the other hand, so that operational performance can be maximized.”

According to the study made by Aberdeen Group, it was noted that Sales and Operations Planning is seen by more than half of Best-in-Class firms as a tactical priority. This process can make the company to be successful as it offers a tool for decision making used in S&OP management. But Sales and Operations is essential to more than just these company areas. It is as well an essential aspect in Finance, Manufacturing, and R&D.