Planning for customer demand is an important part of any fulfilment warehouse’s operations. At times though businesses struggle to plan demand adequately. This can result in situations where they have too little stock and can’t meet customer orders, overestimate demand, or do not adjust for lesser demand which results in overstock, storage congestion, and idle inventory. Each scenario presents challenges for warehouse operations and the business as a whole.
With that in mind let’s take a look at what effective demand planning is, how seasonality comes into play, and some strategies that can be used for planning.
Demand planning is a process which is part of a business’s on going supply chain management. Simply put, businesses use demand planning to plan for and anticipate future customer demand for products and service. By planning effectively for demand a business can then execute their operational strategy flawlessly and adjust seamlessly accordingly to market trends and factors. From a warehouse and inventory perspective companies ensure that they have optimum inventory levels avoiding shortfalls or surpluses.
Demand planning involves all parts of your business and brings together elements of production, budget and financial planning, human resources, warehouse planning, sales, marketing, and so on.
The factors that come into play for demand planning are considerable. Companies thus need to consider sales, market and consumer trends, seasonal demand, and historical trends to create forecasts. Your demand planning should also be flexible enough so that your business can adjust due to unpredictable or unknown variables (for example disruptions in your supply chain).
Seasonality is probably one of the biggest factors that come into play when planning out inventory demand. Consumers simply change buying habits based on what time of the year it is, and in what region they live in. Go to any hardware store in the northern United States during spring and you’ll find gardening and landscaping products galore. Come back in fall and you’ll start to find winter related products. Seasonal demand would also include holiday related purchasing trends.
In order to meet this demand businesses need to be sure that their fulfilment centers can cope. A business that has a good strategic demand plan in place can thus optimize the opportunities that come with seasonal demand.
One of the primary ways that businesses and warehouses can plan their inventory strategy is through maintaining and leveraging good data. A primary source for this data can come from your WMS. A WMS has the unique capacity to track every product type that it stores, the quantities, regions it ships to, who they ship to, and how often they ship each product. All this data can then be used to create meaningful reports that provide historical feedback and from which trends can be ascertained.
For example, let’s say your warehouse ships a variety of home care and yard products. As we previously mentioned some of these products will obviously see spikes depending on the region, and time of year. In the spring you know that gardening products, hardware materials, and like products will spike for homeowners with yards to look after or who may have DIY projects. Your business can then plan to have sufficient stock of these in demand products to take you through the seasonal demand period. Into this you can account for things like lead times from suppliers, adjust your warehouse storage capacity, strategically store items for efficient fulfilment, and plan out your warehouse human resources and logistics so that you can keep up with the influx of orders.
Furthermore more, you can ascertain when buying starts, peeks, stabilizes, and then begins to drop off and start to adjust your warehouse planning in accordance with the next product demand cycle. This will also help alleviate situations where you have overstock at the end of a demand cycle which would otherwise compel you to either find ways to sell overstock (often at a discount) or else store long-term, which increases storage costs and creates congestion in your warehouse.
As we can see the data your WMS collects can be a valuable resource for your demand planning. Yet having the data and extracting the insights from it are two different things. Some businesses have a tough time extrapolating conclusions and reporting on their data. A WMS like Akatia’s WAM application can help here. WAM is built for Salesforce and as such has out of the box reporting functionality. Every data point concerning your warehouse and inventory can thus be reported on. You can even create reports that are specific to your demand planning and that run automatically and which provide accurate historical comparisons. By leveraging the reporting features of WAM you can extract meaningful insights and use them companywide so that your entire operational strategy aligns.
There are many factors to consider when planning for demand from markets trends, supply chain variables, and seasonality, amongst others. As we’ve discussed collecting and maintaining good data is the start of formulating a good demand plan. Having the right technology in place that tracks this useful data and that can then report on it will help you to create a sustainable and accurate demand plan that will support your inventory and warehouse management. In doing so your business will avoid the pitfalls of demand fluctuations like understock, overstock, and lack of resources. Your business will then be able to adjust optimally in a coordinated and predictable fashion that will allow you to maximize these demand opportunities.
If you’re looking to leverage your warehouse data to better plan your inventory management, click the link below to get in contact with us. We’d be happy to speak with you!