How do your sales teams predict demand for products and services? How effectively do you plan your buying and manufacturing cycles?
Businesses such as manufacturers, retailers, wholesalers, distributors, and eCommerce heavily rely on demand to maintain stock levels.
They invest a lot of time studying, evaluating, and analyzing data and sales to predict future demands.
Predicting demand, better known as demand planning, is a process for planning future operations. When you have a better idea of what customers will request, you can improve your buying and manufacturing cycles and satisfy customer needs.
If your business handles demand planning manually, you can automate it with the help of NetSuite to achieve efficiency.
Demand Planning NetSuite is a module that provides estimates for when and what amount of items you need to reorder, how much stock you need on hand to fulfill orders, and more.
This estimation saves your business from overstock and stockouts and helps you keep a balance of inventory levels to meet customer demands.
Demand planning is crucial for every business, and so is the NetSuite demand planning tool that helps make this task easier.
Let’s get into details and learn how NetSuite works and what makes NetSuite a valuable demand planning tool for your business needs.
What is Demand Planning?
Demand planning is a supply chain management process for forecasting or predicting the demand for products and services.
Businesses do demand planning to strike a balance between adequate production levels to satisfy customer demand.
The forecast leverages product history, market trends, historical sales data, and seasonal data to help you plan your purchasing and manufacturing effectively.
But, when this data pulls in from different places, the quantity becomes a lot to manage. If you handle this data manually, the process can easily get overwhelming.
To simplify the planning, you can use NetSuite technology that can help you make demand planning a continuous process.
How Does Demand Planning NetSuite Work?
NetSuite includes a demand planning module that handles the demand planning process and helps you analyze stock demands.
To get an idea of how efficient the process with NetSuite is, watch the demo here.
Demand planning NetSuite gauges information on customer demand to guide your purchasing and manufacturing cycles. This information is crucial when the forecast for a product fluctuates throughout the year.
Demand planning is a statistical forecast that employs several statistical algorithms to accurately forecast market demand. To estimate the demand, the NetSuite module supports four common statistical models.
1. Linear regression
This model takes the help of the least square regression technique and uses data on previous demand levels to predict future sales.
2. Moving Average
Using the moving average of the past few sales periods, this model predicts the average inventory level for a specific item.
3. Sales Forecast
This model uses future sales forecast data (quotes, opportunities, etc.) to help you estimate demand. Your organization can stock up on necessary items based on what you think is essential.
4. Seasonal Trends
It predicts future demand for a season using the historical sales data of the same period. This method best serves companies with seasonal fluctuations in sales to maintain appropriate stock levels.
Besides these models, NetSuite spans a sleek of features that make it more valuable for your business:
- With NetSuite, you can pinpoint when you need to reorder items and in what quantities to balance stock levels without having a surplus.
- The NetSuite module generates messages to help you make the right decisions and optimize inventory levels when needed.
- Based on your demand planning, you can easily generate supply plans with a single click. It saves you time and ensures order accuracy.
- The system notifies you of order tasks based on your planning by sending email alerts, reminders, saved searches, and schedule reports to reduce delays.
4 Crucial Elements of Demand Planning
During the economic crisis, organizations pay more attention to forecasts and internal operations to make them as efficient as possible and meet more demands with limited resources.
But, for forecast demand to be accurate, you need to make sure it takes into account four crucial elements:
1. Appropriate Product History
Data from past periods is usually a great way to forecast future demands and trends. What you could sell in the past can give a good idea of what you can sell in the future.
But not all data is equally beneficial for forecasting demand. You must choose the correct time period and find the data that correlates with contemporary demand. If you take data that is too obsolete and irrelevant to current demand, you will have inaccurate forecasts. That’s why choosing an adequate amount of historical data is crucial.
2. Internal Trends
These are trends in sales determined based on past data.
They reflect patterns in the consumption of one product or more products. During some periods, your patterns may reflect an upward rise; at other times, the pattern may go downward, so you need to think of optimizing your business. Other times, there might be seasonal patterns.
In either case, once the sales patterns become evident, you can utilize this knowledge in planning production and shipping.
3. External Trends
External trends are more influential than internal trends.
Their impact on demand is more intensive. There can be various external factors that impact how a business or investment is able to achieve strategic goals. The external factors may include technological changes, competition, economy, legal, socio-cultural, and political environment.
Considering technological changes, they can be a major disruptor and game-changer. Businesses must not avoid them to escape suffering.
Economic changes include unexpected crises and economic boosts that determine your sales. After all, sales are reliant on the wealth of the population. Seeing that the economic condition is not bright, you may need to adjust your strategy, for example, reducing prices to increase sales volume.
Similarly, political forces can create or destroy your market. For example, a US federal contract banned the purchase of goods from five Chinese companies in 2019. In this case, an external trend caused the companies to lose their market in the US.
Such factors can directly impact a business, increasing or decreasing its overall market. In such a case for your business, you may need to make adjustments manually, avoiding past data and relying on common sense.
4. Events and Promotions
Demand planning is directly proportional to events and promotions.
If you are promoting a product, you will likely see an increase in demand. So, this rise in sales must be a part of your forecast to plan purchase, or you will not have enough resources to meet this demand.
NetSuite gives you the ability to add all necessary data to adjust the forecast for your business.
You should also keep a forecast for events like launching a new product or swapping an old product with a new one to recapture customer interest. This strategy is common in marketing when replacing products and has a good impact on sales.
Likewise, holidays and calendar events have a strong effect on sales and marketing. Your business may also have a high demand during these times, so you must pay close attention to plan your forecast as accurately as possible, keeping these events in your mind.
Why is Demand Planning Important?
When products run out of stock and become unavailable for a customer who wants to purchase, businesses lose out on revenue and eventually lose the customer to a competitor.
On the other side, having a slew of obsolete inventory on warehouse shelves incurs businesses unnecessary space and costs.
Demand planning helps businesses have the appropriate amount of inventory on hand to fill orders without having an overstock of items sitting idle in the warehouse.
The demand on the market wavers significantly due to workforce changes, economic shifts, severe weather conditions, natural disasters, and global crises.
However, businesses can still predict orders and sales using their past organizational data to generate a forecast demand and satisfy customer needs.
Strategic demand planning helps business leaders stay ahead of market shifts, make more proactive decisions, and become responsive to customer demands.
Are you ready to make a leap to NetSuite?
Demand Planning NetSuite is a valuable tool for your business to generate a data-driven forecast.
With NetSuite, your business can eliminate wastages and produce adequate quantities- delivering customers what they need and boosting profit by maximizing seasonal trends.
If you need assistance planning NetSuite implementation in your organization, we are here to help you.
As your NetSuite implementation partners, we can guide you through the process- from implementation and customization to integration and beyond.
For a better idea of our services, check out our service page.