How Forecasting and Demand Planning Connects into Sales and Operations Planning

The main target of a business is making smashing profit or sales. Now, how then do we achieve this target from a supply change perspectives? So let us now evaluate the primary element of how supply chain planning can promote the company’s goal.

We are utmost aware of the necessity of demand planning which is to bring about appropriate, affordable effective performance. While also trying to ensure that commodity is accessible to increase the market sales. A lot of different information is needed in other to predict the demand for goods we put on sale. The aim is to provide helpful insights for the Sales and Operations Planning (s&op) just to make sure that demand is planned appropriately.

“Most times, Demand Planning can appear annoying and misinterpreted by any application of SCP” as mentioned by Supply Chain Insights. The listed below factors are very crucial to the success of our demand planning. 

 

Our product demand needs to be clearly inferred

There is the possibility of having dependent demand, inter/intra plant demand, demand for service part and independent demand for any intending product. Normally, we are always predicting services areas and possibly separating demand but we have to strategize all the demand types in our sequence procedures

Demand movements of one of the primary point. Usually, the more experienced we are about the demand for our products and services, the better our forecast will be. For example, the demand movement is initiated by the bullwhip when it is on movement via the production chain.

You should recognize the significance of Demand Planning

The use of experience and prediction to calculate for different goods at different factors in the chain of supply is admitted to be demand planning. Usually, who produces the forecast, what goods are we working within their life-cycle, where are they, what does their demand structure look like, do we view the market movements, & who is distributing the needed supplementary details so that correct prediction is guaranteed? Undeniably, there are more questions that needed response based on the specific company.

For instance, a company that predicts much more of a lot of large goods which leads to lower stock turn and increased stocks. While the company might or might not see this as an issue, the demand planning permits one to recognize what should be the stock goals, and also what should be the appropriate prediction via current research.

Recognizing how Predicting and Demand Planning Connect into Product Sales and Operations Planning

Prediction and demand planning work together. So to enable value, they must be used in other operations factors. Sales and Operations Planning are among these procedures. Sales and Operations planning can be described as “a process which is positioned on guaranteeing a consistent alliance between supply, demand, production, and inventory plans on one side, and between these ideal programs and the company strategy on the contrary so that practical performance can be optimized.”

According to the research made by Aberdeen Team, it was mentioned that Sales and Operation Planning is viewed by a lot of Best-in-Class companies as a strategic concern. This steps can definitely help the organization to achieve success as it provides something for making decisions used in S&OP management. However, Revenue and Performances are very important to these organization aspects. It is also an important and very crucial part in Finance, Manufacturing, and R&D.

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SUPPLY CHAIN PLANNING, DEMAND PLANNING, AND INVENTORY PLANNING.

Supply chain planning provides strategic and tactical planning that is forward looking with an outlook for the future. Supply chain planning deals with supply, distribution, manufacturing, planning, production scheduling, demand planning, supply chain collaboration, and supply chain network design. Supply chain planning applications coordinate assets to optimize the delivery of goods and services, and information from supplier to consumer, and balancing supply to demand. Its objective is to balance supply and demand in a manner that achieves the financial and service objectives of the enterprise. Supply Chain Planning also includes strategies such as just in time inventory, where more precise planning  is allow for more flexible inventory storage requirement. Supply chain planning and supply chain management in general, is valuable to modern businesses. They help businesses automate, control and monitor their processes using modern tools, which help them save money and allow them to work more efficiently in competitive fields and markets. The following are the benefits of supply chain planning:

·         Reduction in lost sales

·         Reduce out-of-stocks

·         Lower inventory requirements to support target service levels

·         Faster fulfillment cycles times.

·         Reduced working capital requirements.

Demand planning, the importance of demand planning is to ensure operations are timely, efficient and cost effective. Effective demand planning can guide users to improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, enhancing profitability for a given product. Demand planning is using forecasts and experience to estimate demand for various items at various points in the supply chain. Effective demand planning then requires a variety of information’s like; qualitative, quantitative, timely, usable, and as accurate as possible, for proper forecasting of the products. Demand planning can save your company money and also increase your profits.

Advantages of demand planning:

·         Efficient supply chain scheduling: this helps you plan scheduled maintenance shutdowns away from busy sales periods and have adequate materials and labor on hand throughout the year. When you know about a coming spike in demand, you can contact customers who don’t have time sensitive inventory needs and ask them to accept orders earlier or later than a specific time when you know will be busy.

·         Adequate cash flow: knowing the peaks of demand helps you better in managing your cash flow, ensuring you have enough money on hand to pay bills. An inability to make your products leads to an inability to supply your customer. Demand Planning lets you reserve cash or negotiates bridge loans or credit terms in advance.

·         More accurate budgeting: the more accurately you can forecast demand, including the timing of your sales, the more accurate you can be with budgeting. If you have a flexible budget, such as tying marketing spending to sales, you can shift paid marketing efforts such as advertising and free marketing efforts such as a social media campaign between slow and busy periods.

Inventory Planning, this is the process an organization adopts to determine the optimal quantity and timing of inventory to align it with sales and production capacity. Inventory planning has a direct impact on a company’s cash flow and profit margins especially for smaller businesses that rely upon a quick turnover of goods or materials. Every organization that is engaged in production, sale or trading of products holds inventory in one or the other form. For instance, an organization dealing in manufacturing and production may hold inventory of raw materials, spare parts, and finished goods. All sectors of an organization ought to have their inventory application concerning the products they are producing, selling, and even buying. The following are the advantages of inventory planning:

·         You can conduct stock rotation.

·         You know your stock level.

·         You can quickly identify items that are not moving that you can remove from your inventory.

·         You can optimize and reduce the stock of items that don’t move quickly.

Inventory planning insures customer satisfaction with a distribution process

Inventory planning is a kind of process that seems to be like just another business management process, but it is a factor that decides how well your business is doing, making it an important aspect of whether your company will be successful or not successful in the world of business. The main reason for this is that most of the time, the company inventory can be the biggest expense and if it's not managed and planned carefully, it could have a negative effect in the overall revenue of the company. To have a better knowledge of why it's like that, here are the top 3 reasons why inventory planning is highly essential.

Inventory Planning help you protect your goods from theft

This reason can be overlooked often get marginalized, but theft is a bigger issue than many companies realize. Millions of dollars can be lost in a year and the only way this huge loss can be effectively combated is to know your inventory, who it is heading to and who is accessing it. The more knowledge you have about your inventory, the more you are likely to spot and prevent inventory theft.

  

Risk of overstocking and lost sales can be reduced by inventory planning

When proper inventory planning procedure is not followed, there is more likelyhood that there will be overabundance or insufficiency of inventory for the number of customers willing to order for the product. This can incure huge losses in revenue for 3 reasons: because of goods being stocked on a warehouse shelf with no buyer to purchase them, buyers not being able to buy products due to lack of available inventory, or order cancellation by customers due to delay in delivery of the products. However, you can have a carefully planned inventory that will optimize your distribution process through the use of inventory planning services. When you implement this, it will boost the overall revenue of your business, giving you a better opportunity to achieve success in your business.

Proper inventory planning insures customer satisfaction with a distribution process

When a firm lacks an inventory that is planned out thoroughly, it could cause delays in the distribution process which could cause customer dissatisfaction and this can damage your reputation as well your bottom line. Therefore, you can have an inventory that is where it needs to be always as well being in exact numbers required by using inventory planning and inventory management. When the inventory is planned properly, there is a smooth running in the distribution of products and shipping of inventory to your buyers efficiently and timely. This will enable your customers to stay happy and come back to buy more of your goods and services.

Employing the services of a professional that will handle the inventory planning for your company, Its is an important necessity in the world of business, so you need to employ the services of a professional that will care of your inventory planning while you can focus on other areas or for planning like Demand Planning, Supply Chain Planning, Sales and Operations Planning that will enable your business to achieve success.