Demand management has increasingly become critical to organisations. The spike in consumption volatility require that organisation implement a system of managing demand that yields financial benefits. As a result, the demand management function has evolved as one of the most important function within the supply chain. One of the many goals of the demand management function is to accurately predict demand and a long with collaborative activities with the supply planning function ensure that demand is aligned with supply. That is not an easy task. The ability to accurately predicting demand has a number of benefits: ensuring the right product and quantity is manufactured, the right quantity is ordered and stored. Ideally when this is achieved, it has a significant impact on the overall financial performance of an organisation, and contribute to customer experience and retention.
Effective demand management with a long planning horizon generally over a 24 month’s planning horizon help organisations properly engage with suppliers and commit to raw material procurement, plan resources, and schedule production at the required quantities— a sound financial benefit to the organisation. When demand management function is non-existent or poorly executed, it results in efficiencies in inventory holding space, money tied up in inventory, opportunity cost, increase in obsolesce, reduced bottom-line, and loss of customers. A robust demand management function integrates well developed processes and capabilities to ensure that it meets its goal. These processes and capabilities are constantly reviewed to ensure continued relevance and that the engagement of best demand management practices are maintained.
Demand management employs a number of tools to ensure its ultimate goals are reached. There are a number of demand software systems that offer optimum demand management activities, generally speaking they all seek to achieve the same goal but the mere deployment of a demand solution software does not in itself translate automatically to a robust demand management function. By and large the skills required to ensure demand management targets are reached largely come from the engagement of demand management subject matter experts and include the ability to accurately produce demand forecast (net requirement forecast). Engage with sales and marketing to get inputs to forecasts (sale forecast). Collaborate with other stakeholders during the demand planning cycles (demand reviews).
Effective understanding of the role of integrated business planning (S&OP). Ability to accurately plan cycle stock, statistically calculate safety stock and measure forecast accuracy, errors, and bias. Ability to understand and apply various forecast methodologies, approaches and models and take into account exceptions gathered from internal and external stakeholders. Integrating the above require effective collaboration across organisation which include production, supply planning or procurement, sales and marketing, inventory control, finance and external customers. If your organisation does not currently have a demand management function and wishes to implement one, or your current demand management function is not producing effective results. Feel free to get in touch with us and we will be happy to help.