The goal of most manufacturers is to maximize profits. Because of this, many have chosen to minimize the number of goods they hold in inventory by producing based on actual customer demand. While this technique has been helpful for some manufacturers, others may find that waiting on actual customer demand is not feasible.
The purchasing, manufacturing, and delivery lead times of most companies are far greater than the amount of time that customers are willing to wait. With the “Amazon Effect”, most consumers are expecting to receive their order within a few days.
This is why Demand Planning is important for manufacturing operations that are looking to minimize costs and deliver on time. Accurately predicting the demand of items will allow manufacturers to produce only what will be required and be able to deliver the items in a timely manner to their customers.
Demand planning has become an integral part of production facilities that are looking to further enhance their overall supply chain as it allows manufacturers to keep inventory levels to a minimum while being able to meet their demand.
What is Demand Planning?
Demand Planning is a process within supply chain management that aims to predict future demand for items so that manufacturers can produce the right amount of items to supply those demands.
In general, demand planning starts by analyzing past demand and sales data. This will allow you to generate a demand forecast based on historical data and help you identify trends in demand for different products.
Once the forecast is generated and implemented, it is important to compare it to actual sales demand and adjust it accordingly. Over time, you will be able to increase the accuracy of your demand forecasts.
It is important to create an in-depth and accurate demand plan to maximize the benefits of demand planning. Before jumping into planning your demand, it is important to understand the advantages it can bring.
Advantages of Demand Planning
The advantages of Demand Planning include:
- Forecast Accuracy Improvement - Creating an accurate demand forecast can be extremely challenging. However, this is an essential component of demand planning and is a process that can be improved over time. Not only does forecasting help identify how many items will be required, but it can also help provide insight into the expected revenues. When manufacturing organizations create demand forecasts and review them against actual demand, the accuracy of the generated forecasts will improve over time. For example, if the company consistently overestimates the demand for an item, it can investigate what led to the forecast inaccuracy and then adjust it so that it becomes more and more accurate over time.
- Manage Inventory Levels - Demand planning can help manage the inventory levels to align with increases and decreases in demand. Incorporating demand forecasting strategies to actual demand signals will allow manufacturers to have the right number of items in stock. This ensures that you have enough materials and products when the demand for those items increases and prevents holding too many unnecessary items in stock when the demand decreases.
- Improved Production Scheduling - By predicting when sales are likely to happen, manufacturing organizations can better plan production scheduling, warehousing, and shipping. Being able to plan production in advance can help save costs. For example, the capacity plan can be used to identify the best time to conduct mandatory maintenance work on machines by avoiding periods where there are many orders scheduled. This will help save money as the production schedule can be optimized around the planned downtime and will help prevent unexpected machine breakdowns.
- Optimize Labor Scheduling - As labor costs represent one of the highest in manufacturing, it is important to know how many workers you will need to complete your orders on time. When there are too few workers during a period of high demand, your business will experience a decrease in fulfillment time and will have a reduced daily order completion rate. While having too many workers can be costly, it is important to be able to deliver on your promises to maintain your customers’ satisfaction levels high. As inventory management, forecasting, and production scheduling become more accurate, you will be able to know how many workers you will need to complete the production orders in a timely manner.
With PlanetTogether, we can see if our paint department will be swamped next Tuesday and bring in more staff to meet the need.
Demand Planning will ensure that you keep your customers happy by delivering goods in a timely manner while reducing inventory-associated costs. A software that can help manufacturers with demand planning is PlanetTogether’s Advanced Planning and Scheduling (APS) software. This powerful software combines planning and scheduling with forecasting, capacity planning, and inventory planning functionalities which will provide a precise understanding of how much product to produce within a given time period.
Advanced Planning and Scheduling (APS) Software
Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.
With PlanetTogether APS you can:
- Create optimized schedules that balance production efficiency and delivery performance
- Maximize throughput on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to resource capacity
- Enable scenario data-driven decision making
The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!
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