Managing Demand and Supply in a Supply Chain is a broad concept in supply chain management. It is the topic under the chapter on Supply Chain Planning & Design. Mainly, this topic is utilised as chapter four topic in the book of supply chain management.
Managing Demand in a Supply Chain
How Demand Planning Can Improve the Supply Chain?
Supply networks must be as efficient as possible if they are to maximize profits. Supply chain efficiency depends on accurate demand planning, which is crucial for inventory and income.
What is Demand Planning?
Forecasting the demand for a product is a supply chain management method used to guarantee that the product can be supplied and meet consumer expectations. There must be an equilibrium between having enough inventory to fulfill client demands and having excess. Changes in the workforce, fluctuations in the economic climate, extreme weather, natural catastrophes, or global crises may all have an impact on demand.
What are the Aspects of Demand Planning?
The three basic areas of demand planning are as follows:
1. Product Portfolio Management
When a company introduces a new product to the market and plans for its decommissioning, it is called product portfolio management (PPM). To maximize market share, it is crucial to know how new items may affect the demand for existing products in order to comprehend the total product mix that is necessary for success.
2. Statistical Forecasting
By analysing historical data and using sophisticated statistical algorithms, supply chain predictions may be generated using statistical forecasting. Each model’s correctness must be assessed, outliers and exclusions identified, and assumptions clarified in this section. Statistical forecasting may also be used to examine seasonal changes (such as the spike in holiday shopping that happens between October and December for retailers or the increase in yard equipment sales in the spring months).
3. Trade Promotion Management
Demand may be influenced by marketing events such as trade promotions, particularly in the retail sector. With the use of in-store giveaways, sales discounts, and other promotions, trade promotions may increase demand for a product by connecting a brand with its target audience.
Read More: Importance of Demand Planning in Supply Chain Management
Why is Demand Planning Important?
Businesses lose out on money and risk losing a consumer to a rival if a product is unavailable to buy because it is out of stock. A large amount of underutilized goods, on the other hand, wastes both space and money. To keep ahead of market developments and make more proactive choices, company executives need to use demand planning.
1. Best Practices for Demand Planning
The correct tools, information, and procedures are required for demand planning. If you’re looking for some best practices, here are a few things to keep in mind:
2. Implement the Right Software
Enterprise resource planning (ERP) systems provide a wide range of features, so picking the correct one may be difficult. You need to look at the forecasting capabilities of ERP software, as well as the provider’s reputation and the reporting tools that are available to you, as well as the transparency or dependability of the predictions that are generated.
3. Gather and Prepare Data
Now more than ever, demand planning is driven by data. Data mining and aggregation that can discover areas for improvement or reaction may assist to establish a more agile process model by providing real-time insight into inventory movements and metrics reports that offer a clear picture.
4. Define Process Models
Lack of a structured demand planning cycle results in anarchy. An all-too-common problem in organizations is a lack of accountability, which results in worse overall results. Typically, the demand planning process consists of the following steps:
- Data gathering and preparation
- Preliminary projections
- using market research data
- To reconcile bottom-up predictions with top-down financial and sales projections, consideration of sales targets and financial reports is necessary.
- Finalize your prediction by reworking it.
- Analytics-based real-time performance monitoring
5. Implement and Monitor
A prototype version of the demand plan is often developed by successful demand planners based on historical data or descriptive analytics Aside from that, they make frequent revisions and have a team of individuals entirely committed to creating the plan and carrying it out in order to minimize mistake or bias, as well as building mechanisms for its implementation.
The Future of Demand Planning in the Supply Chain
Digitalization of supply chain and demand planning is a trend that is sweeping across a variety of industries. Automated projections are enabling inventories to operate more efficiently while still meeting demand, thanks to advancements in machine learning applications in the supply chain.
A lean, agile, data-driven approach to supply chain management that incorporates artificial intelligence and machine learning techniques will allow supply chain professionals to discover new ways to reduce operational costs while simultaneously boosting revenue and giving their companies a competitive advantage.
It is indeed easier to prepare for demand at the moment when the supply chain is bettManaging Demand and Supply in a Supply Chainer integrated. Demand planning may be a crucial part of a supply chain’s profitability if handled correctly.
Read more: Supply Chain Integration
Managing Supply in a Supply Chain
Organizations’ supply chains can only be successful if they meet two criteria: they must be cost-efficient and they must provide outcomes on schedule. In the beginning, we spoke about bread supply chain management. It’s a straightforward one. There are a plethora of supply chain management procedures, each with its own level of complexity and the number of items involved at each stage. To put it another way, supply chain management starts and ends at the source of the product or service.
Every day, we use and consume a plethora of products, and supply chain management is the thread that ties them all together. Breaks in this chain may cause the system to be disrupted in a “doomsday” fashion. The supply chain management system is made up of a number of crucial components. Each part of the puzzle will get a quick rundown.
1. Planning
This is a critical step in the process. The plans must be finalized and implemented prior to the start of the complete supply chain. Checking the demand for the product or service, as well as the feasibility, costing, profit, and personnel, are all essential. It’s almost difficult for a company to succeed in the long run without a solid strategy in place. As a result, this phase must be given the attention it deserves. Only when all the benefits and negatives have been considered can one go forward. Every firm must have a strategy based on a blueprint or a road map. In order for a supply chain management system to be effective, it is essential that planning be carried out.
2. Information
Today’s world is ruled by a never-ending stream of data. In order to be successful, a company must keep up with the most recent information on all of its production’s numerous components. A company’s supply and demand patterns may be better understood if the information is provided to all levels of the organization in a timely manner. In an information-based global economy, a lack of understanding about any area of a company’s operations might signal disaster for the company’s future.
3. SourceThe role of suppliers in supply chain management is critical. Different types of raw materials are used to make the final products and services that are sold to the consumer. As a result, it is critical that raw materials of sufficient quality and affordability be obtained. If a supplier fails to deliver on time and on budget, the company is doomed to failure and a tarnished image. It is critical for a business to have high-quality resources in order to produce high-quality goods and preserve its market reputation. As a result, suppliers must play a significant role in supply chain management.
4. Inventory
It is crucial for a successful supply chain management system to keep an accurate inventory. An inventory is a list of all the goods, raw materials, and other necessities that go into making a product or providing a service in its whole. Keeping track of what’s in stock and what has to be ordered is essential for this list. The manufacture and sale of a product are impossible without appropriate inventory management, which is a key component of supply chain management. Since it affects the supply chain, companies are now paying greater attention to this component.
5. Production
One of the most critical parts of this system is production. All other parts of the supply chain must work together in harmony for this to be achievable. Proper inventory management and supply chain management are critical preconditions for the commencement of the manufacturing process. Testing, packing, and final preparation for distribution follow the creation of products.
6. Location
A site that is beneficial for a business is essential for the survival and growth of any company. Consider the case of a plant producing carbonated drinks that are built in a region with limited access to water. Such a company relies heavily on water. Lack of water might have a negative impact on both output and the company’s reputation. If a firm is forced to share an already limited raw commodity with the public, it will not be able to exist. In order to be successful, businesses must be located in a place that is easily accessible and near to the sources of their raw materials. A company unit’s human resources must also be taken into account while setting up.
7. Transportation
Raw materials must be transported to the production facility, and the finished product must be transported to the market. In order to keep the company running smoothly, timely delivery of products is required at each level. Businesses who pay attention to and take excellent care of this component get the benefits of on-time production and delivery.
An organization can’t afford to neglect the need for a risk-free transportation method. If the transportation management system is in-house or outsourced to a third-party provider, it must guarantee that there is no damage or loss while in transit. Security in shipping is built on two things: an efficient logistical system and accurate billing.
8. Return of goods
The ability to return defective or malfunctioning items, as well as a customer complaint resolution unit that is quick to respond, are two elements that help build a healthy supply chain.
There is no perfect person in the world. Every millionth time, if not more, a machine will go wrong. Return of products is a common occurrence in a well-functioning corporate operation. It’s impossible to prevent breaches in even the most stringent quality control procedures. Businesses must automatically recall products and make public apologies when they have such breaches, which are almost always followed by customer complaints. This not only fosters a strong relationship with the consumer but also helps to keep goodwill high in the long term.
The supply chain management system relies on these eight interdependent components to run well. It guarantees the company’s prosperity and reputation. Supply chain perfection requires that businesses pay attention to all of these elements. Supply chain management systems in place by companies place a high value on all of the above components for Managing Demand and Supply in a Supply Chain, as well as ensuring that management and teams at all levels adhere to the regulations. The bottom line of every organization is its ability to generate a profit, and preventing any holes in the supply chain is critical to ensuring this. It’s imperative that any problems be addressed right away, and any weak points are strengthened or eliminated. It’s crucial to consider both Managing Demand and Supply in a Supply Chain while running a firm. For any organization to succeed, it is essential to keep up with the latest trends in Managing Demand and Supply in a Supply Chain while following a well-thought-out strategy. An efficient supply chain management system is necessary not just to ensure that items are produced on schedule, but also to ensure that customer needs are satisfied.
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