Demand planning is just planning for demand, right? Yes, to an extent. But it’s not so cut and dry. Think, instead, of demand planning as an iceberg. On the surface, it seems like a relatively straightforward and simple concept. But if you delve just a bit deeper, you’ll start to realize how complicated and nuanced demand planning can be.

Unfortunately, while it seems all companies understand its importance, as SupplyChain 24/7 points out, very few understand how to go about it successfully. And that’s perhaps partly due to the fact that the concept is still a bit hazy to them.

So what is demand planning exactly?

The goal of demand planning is to anticipate demand for a given product and ensure that a company’s supply chain is able to meet that demand efficiently and without incurring excess expenses. So demand planning is, in essence, all that goes into making sure a company can supply consumers with a given product or service when, where and how they want to buy it while keeping costs as low as possible.

Demand planners, therefore, regularly monitor trends and consumer behavior in order to create accurate forecasts for each product, product line, or service. They also coordinate with key players all along the supply chain. These can include the original equipment manufacturers (OEMs) and suppliers as well as the distribution centers responsible for shipping the product out to customers or retailers and the retailers themselves.

Common pitfalls that most demand planners should be aware and strategies as to how best to avoid these are described in this John Galt e-book.

Where does demand planning fit within the organization?

On a company’s organizational chart, demand planners would most likely belong to a company’s operations department. Although, as companies can choose to organize themselves in a number of different ways, this can vary. And in reality, demand planning isn’t just a subsection of a company’s operations planning. It’s actually the bridge between a company’s sales and operations verticals.

Demand planners work very closely with the sales and marketing teams to devise an accurate forecast. They then build out a demand plan that details ideal inventory levels, shipping timelines, and all the steps the company needs to take in order to meet demand.

But that’s not all demand planning can be

Traditionally, demand planning has been viewed as a reactive process. But demand planners can also play a pivotal role in influencing demand. This could be driven by supply or inventory issues. For example, excess supply could mean working with the marketing team to carry out special promotional campaigns.

Or, more broadly, it could be driven by a company’s overall business objectives. If, say, there are plans to introduce their product to a new market, and the anticipated demand will overwhelm suppliers, demand planners may need to take steps to triage demand fulfillment in other markets.

Whether you’re a small business with just one product offering, or are a large company with multiple product lines, implementing a successful demand planning strategy is key to your survival. While demand planning itself may seem like a nebulous concept and, therefore, a daunting endeavor, it doesn’t have to be.