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The terms demand planning and demand forecasting are often used interchangeably. Though they are unmistakably linked in the supply chain management process, demand planning and forecasting are not the same thing. One (forecasting) is an essential function of the other (demand planning).
Demand planning is a process; accurate forecasts are the results of an effective demand planning process. Demand planning is itself an essential function of the S&OP (Sales and Operations planning) process. Accuracy is essential across the board, and the research data science strategy a company uses to arrives at these numbers is a vital part of the demand planning process.
The following article will define demand planning and forecasting, explain the key differences and similarities between them, and demonstrate how demand forecast accuracy is essential to demand planning and to the overall S&OP and supply chain planning/demand management strategies.
Demand planning is the process of forecasting demand for a product (or service) and executing an operational strategy across supply chain in order to meet it. Demand planning is a critical business planning function: It tells you where you're headed and when, and how to adjust and automate operations and finances accordingly. Dynamic, highly accurate forecasts inspire a confident demand plan, which enables teams to work together in order to meet future demand targets within budget and hit revenue goals.
In the context of supply chain management, demand forecasting refers to the process of predicting consumer demand or predicting sales (which are two in the same). An effective demand plan necessitates highly accurate demand forecasts that should deliver on agreed strategies.
An accurate demand forecast is incredibly hard to come by, let alone rely on. A demand planner must have in place the processes and know-how in order to effect accurate forecasting. This depends on a company's ability to:
Demand planners tasked with calculating sales forecasts have a lot of weight on their shoulders. When demand predictions are highly accurate, distribution, inventory, and manufacturing teams will be able to have a clear picture of what they need to do in order to meet demand targets. When demand predictions are inaccurate, the domino effect can be crushing to business:
However, when demand planners have the right tools with which to build an accurate sales forecast, the benefits are incredible. The entire supply chain benefits, including distribution, inventory, and manufacturing. But this is only true when data is centralized across supply chain. Having one source of truth is essential to demand planning and forecasting, the S&OP process, and the overall health of business and supply chain. Without it, data is siloed and non-dynamic.
Unioncrate is an AI-powered Supply Chain Planning Platform that gives CPG brands the technology they need to compete and win in a rapidly changing consumer landscape. Our automated demand and supply forecasts deliver unmatched accuracy, collaborative visibility, and actionable intelligence, simplifying a manual-heavy process and slashing hours from your week.