Improve Demand Planning with Inventory Planner

If you are in business, you understand the economic fundamentals of supply and demand and the relationship between the quantity of a commodity that producers wish to sell and the quantity that consumers wish to buy. But the concept of supply and demand is not static. For many products, demand is constantly shifting, often rapidly and based on a variety of factors. It is up to businesses selling the product to anticipate and adjust their strategies according to these changes in order to continue to meet customer demand while maintaining efficiency. That’s where demand planning comes into play.

Demand planning is something every retail, e-commerce, or wholesaler business must do to maintain optimal inventory levels. Accurately planning for fluctuations in demand allows merchants to be able to meet customer demand without running out of stock. It also helps businesses avoid accumulating too much excess inventory that can tie up cash flow with unnecessary inventory holding costs.

What is Demand Planning?

Demand planning involves utilizing a variety of data and advanced metrics to forecast future market demand for certain products. You can then use this information to inform your ordering strategy to ensure you are able to meet that demand. Proper demand forecasting requires the use of past sales data, sales forecasts, supply chain management, inventory management, and other internal and external information in order to ensure accurate predictions, order quantities, and replenishment timing.

Why is Demand Planning Important?

When demand planning strategies are effective, they can lead to optimal inventory levels, improved sales, increased revenue, and higher customer satisfaction. When demand planners forecast demand incorrectly, the results can affect your entire business. Poor demand planning can lead to costly inventory imbalances and inefficiencies. Ordering too much inventory can result in excess stock, tying up capital, increasing carrying costs, and potentially leaving you with a warehouse full of low-value or obsolete dead stock. Insufficient ordering can lead to missed sales, lost revenue, and customer dissatisfaction. 

Demand planning typically aims to cover the upcoming 18 to 24 months, though this timeframe can vary depending on the product or the industry. Predictions are also subject to frequent changes and adjustments as market conditions and supply chains fluctuate. Because of the myriad factors that can influence the market and how you forecast demand, you need an inventory planning solution that is able to take everything into account and calculate precisely what your business needs and when.

The Keys to Successful Demand Planning 

Demand planning is a complex process and involves a number of steps:

•     Internal data. Sufficient internal data collection, aggregation, and analysis are critical components of accurate demand planning. Past sales by channel and location, seasonality, marketing campaigns, inventory levels, out-of-stock frequency, inventory turnover, lead times, and other important metrics are necessary to make effective forecasting predictions.
•     External data. Utilizing external data is another essential part of effective demand planning. Metrics like recent delivery times of suppliers and vendors, customer purchasing habits, macroeconomic conditions, and viral popularity can all impact the demand for certain products and must be taken into account to maintain demand forecasting accuracy.
•     Select a demand forecasting model. There are a variety of different forecasting methods that fit the needs of different businesses. You may need to implement demand predictions by product, product type, sales channel, or customer demographic. Here are a few:

o   Average demand model. This demand forecasting method assumes that future demand will most likely be an average of the last few recorded sales periods. This model is best for products that have a relatively static demand and aren’t affected greatly by factors like seasonality that can cause demand to spike or wane.

o   Seasonal trends model. This method forecasts future demand based on historical data during certain months or seasons. This model is best for businesses whose sales are significantly affected by seasonality.

o   Linear regression model. This method takes previous demand levels and uses a least-square regression statistical model to calculate future sales predictions. Also known as the “line of best fit,” this model plots trajectories based on previous demand and extends those fluctuations to predict future demand.

•     Analyze results. Identifying key performance indicators (KPIs) and goals will allow you to measure the effectiveness of your demand planning strategy. Metrics like sales forecast accuracy, inventory turnover, order fulfillment lead times, and more enable you to see performance and make necessary adjustments.

There are a variety of machine learning, IoT, and AI-powered tools that can aid in the process of gathering the data necessary to improve demand forecasting. But aggregating and utilizing that data can be cumbersome, labor-intensive, and prone to errors if you try to perform complex calculations manually. The only way to ensure you are producing accurate, up-to-date forecasts is to use dedicated inventory planning software like Inventory Planner.

Improve Demand Planning with Inventory Planner 

In today’s market, where consumer demand trends can shift quickly, you need a solution that intuitively adjusts to changing market conditions just as fast. Inventory Planner uses dynamic algorithms that can automatically adjust your inventory planning strategy to accommodate rapid changes in demand, ensuring that you always have reliable forecasts and dependable ordering recommendations to future-proof your business. Here are a few of Inventory Planner’s advanced features:

•     Custom forecasting models. Inventory Planner’s dynamic forecasting takes into account numerous factors to ensure accuracy. Seasonal, non-seasonal, retail, and wholesale products all sell differently, so Inventory Planner offers a variety of models to fit your needs.
•     Automatic adjustments. Inventory Planner constantly monitors your sales patterns and adjusts demand forecasts accordingly, so you’ll always have the right stock for the next trend.
•     Eliminate overstock. Inventory Planner uses key metrics like last sold date, overstock units, and overstock costs to reduce overstock and get rid of products that are tying up cash flow.
•     Marketing alignment. Whether you have a big promotion coming up, a product has been featured by an influencer, or a viral campaign has gained traction, Inventory Planner syncs your forecasts with your marketing to ensure you don’t run out of stock when you need it most.
•     Multiple locations and channels. Inventory Planner provides reliable inventory purchasing and warehouse transfer recommendations based on up-to-date forecasts for all your locations and channels.
•     Predict new product sales. Inventory Planner utilizes sales data from similar products to predict demand for new items, so you have accurate ordering recommendations even without internal sales data.

Inventory Planner’s cutting-edge demand planning capabilities can help your business establish optimal inventory levels across multiple SKUs, item categories, bundles, inventory locations, and sales channels, no matter how demand may shift in the market. It automatically updates forecasts based on new sales patterns and other factors, automatically applying changes to maintain reliable purchasing recommendations. 

Inventory Planner gives retailers, e-commerce merchants, and wholesalers the demand planning versatility to handle rapid market fluctuations with ease. With up-to-date sales and inventory insights, detailed metrics, and accurate ordering recommendations across SKUs, product types, departments, warehouses, and suppliers, Inventory Planner can help optimize your inventory strategy so you always have exactly what you need to meet demand.