Demand Planning vs Demand Management

8/20/21 12:00 AM

shutterstock_148488539In manufacturing, it is important to properly anticipate demand to know how much to produce, when certain products will be needed, and how much inventory you should keep on hand. Doing so will ensure that your supply is aligned to the incoming demand so that you can fulfill customer orders for the lowest cost possible.

Being able to properly anticipate and analyze demand requires that you have a thorough insight and understanding of your production operations. This is why demand planning and demand management are crucial components for any manufacturing facility. 

While demand planning and demand management are similar, there are differences between the two processes. In order to adequately utilize these processes, it is important to understand the differences among them.

 

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. 

This process is an integral component pertaining to manufacturing operations. Without demand planning, it is much more challenging (almost nearly impossible) to be able to adequately produce an accurate estimate of products within a given time period. The demand plan is usually generated by looking at past sales data to determine how many items will be purchased in the future. This process also correlates with supply and inventory planning to ensure that you have enough materials and parts to produce your items. 

The biggest challenge for manufacturers is to be able to stay ahead of the market and the changing demands of customers. If your demand plans cannot be quickly adjusted, you increase your risk of running into stock outs and being unable to fulfill customer orders. 

 

Demand Management

Demand management is similar to demand planning as both processes attempt to balance supply and demand within the manufacturing operation. However, demand management goes beyond demand planning 

This process is made up of four elements that will ensure that production facilities are able to meet the incoming demand based on their current capacity. These elements are planning demand, communicating demand, influencing demand, and prioritizing demand. 

While demand planning is an important aspect of demand management, manufacturing facilities will see better results when they communicate the demand plan so that all departments are aligned. They may also want to shape the demand through marketing and sales activities. The prioritizing demand element of demand management involves determining which products or customers should have priority when capacity is limited. 

Demand management processes bridge supply and demand to optimize decision-making, ensure that production/inventory costs are minimized, and maximize revenues. In other words, demand management oversees the current status of customer demand and ensures that the production facility does not experience any shortages or other activity pertaining to profit loss. 

 

Demand Forecasting Accuracy

Effective demand planning and management rely on accurate demand forecasts. However, most production companies generate forecasts with a relatively high margin of error with values ranging between 11 and 28 percent. This is not an ideal situation as inaccurate demand forecasts will cause the production facility to purchase either too much or too little material in anticipation of the forecasted demand. 

While one may think that having an excess of materials would be more beneficial, this can incur high inventory holding costs which can be detrimental to the success of the organization. Demand planning and management strategies will help manufacturers control how much material and capacity they will need to effectively meet the incoming demand. The good news is that technological advancements have made demand planning less complex and easier to understand. Advanced Planning and Scheduling (APS) softwares like PlanetTogether APS are able to automatically generate forecasts based on sales order history for specific items.

 

With PlanetTogether, we’re able to make strategic decisions that improve operations. We can proactively prepare for anticipated increases or slowdowns in demand.

DICK MARX, MATERIALS MANAGER, KNAPHEIDE TRUCK EQUIPMENT

 

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!

Related Capacity Planning Video

 APS Resources

Topics: Implementation, APS, APS, Demand Forecasting, Demand planning, APS benefits

0 Comments

Download the APS Shootout Results

LEAVE A COMMENT

PlanetTogether APS: A GPS System for your Supply Chain - See Video



Recent Posts

Posts by Topic

see all
Download Free eBook
Download Free APS Implementation Guide
Download Free ERP Performance Review