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Why Is Demand Planning Important?


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Your business depends on accurate decision-making – and nowhere is this more important than in the area of demand planning.  

For any size business or enterprise, knowing – ahead of time – the demand for their product or service is crucial to efficiency, and profitability.  It allows you to make better production and inventory decisions, well in advance of customer orders.  The alternative is guesswork, and potentially incorrect assumptions which could result in serious issues on either end of the spectrum – i.e. either too much demand or too little.

Here’s a look at some of the ways demand planning can benefit your business operation.

Demand Planning Reduces Operating Costs

Knowing in advance what to expect from your customers is the least expensive way to operate your business.  Accurate demand planning allows you and your team to produce the right quantities and types of goods, to fit customer needs.  Producing too much of one thing, and not enough of another, results in unsatisfied customers on one end, and too much inventory on the other. 

Achieving the correct production and inventory gives you not only the best possible outcomes for your customers; it’s also the most efficient way to operate – and greater efficiency equals lower operating costs.

Proper Demand Planning Makes Customer Satisfaction Go Up

It’s a frustrating thing for a valued customer to find that the product they need now is not in stock.  Your customers’ operations could be adversely impacted, as well as their own customers, due to your insufficient production and inventory levels.

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  Ultimately, this will come circling back to you, in the form of complaints and pressure to produce on an emergency basis – always the most expensive and disruptive way to go for any business.  Having proper demand planning and analysis, done well in advance, minimizes the chances of this type of scenario, and your customers will appreciate the efforts you make on their behalf.  Watch their satisfaction levels go up as a result of your diligent demand planning.

Demand Planning Enhances Your Organization’s Agility

We all know that no sales forecast is 100% accurate.  But doing your homework in advance and anticipating your customer needs, through demand planning, goes a long way to improving your organization’s agility.  A more agile operation can make moves to address shortfalls or shifts in demand far more easily than one with no advance preparation at all.

Demand Planning Makes an Organization Proactive Rather than Reactive

It’s the best possible strategy to adopt when it comes to production, inventory, and everything else to do with your business.  Proper demand planning allows you to address issues and changes in a proactive way – which also happens to be the most cost-effective way.  Constantly being in reactive, emergency mode is not only stressful – but it’s also less profitable.  Removing stress and increasing profits – are two excellent reasons to consider a strategy of demand planning for your organization. It’s a frustrating thing for a valued customer to find that the product they need now is not in stock.

We hope you’ve found this quick summary of the importance of demand planning useful. We welcome your questions and comments. Contact us.

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