Demand Management is gauging the demand for a product or service in the future and planning the manufacturing so there wouldn’t be supply and demand gaps.
The success of any business depends upon how they are creating the demand for a product in the target market and then, how they are managing the supplies to fulfill that demand. In this post, we will understand everything related to demand management and their fundamental idiosyncrasies.
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Why is Demand Management Necessary?
Does it at any time happen to you that you saw an ad about a product and then you wanted to buy it? Imagine this case; just like you, there might be millions of people who want to have the same type of product too.
To make the people who want the product happier, the manufacturer needs to have enough products in stock.
This is to make sure that everyone will get the thing that they want to have. The concept here is that consumers want a certain product, and that concept is known as demand. Apart from that, the goods which are provided to the consumers are known as supplies.
The idea seems to be pretty simple, to be honest. However, the real problem arises when the manufacturer is not able to supply according to the demand of the person, or it might be the case that the demand is particularly weak and the products just remain seated on the shelf.
When such problems arise, demand management is something that can help in the process for sure.
Now we are going to talk about demand management right here. It is the process of prediction and the planning of demand, which comes regarding a particular product. For those who want to know about demand management, this is the perfect place to be for sure.
Demand Management Defined
Most people who are reading this post would want to know all about demand management. But before we get into the details, it is essential to know the definition of the term demand management.
To define this term, we can only say that it is the process where the manufacturer gauges future demands and then plans on the supplies for that particular demand.
To manage this demand properly, the companies need to make sure that they are looking into different factors. First of all, they need to understand the customers and what their needs and requirements are.
So, what is it that the customers want to have from the companies?
Apart from the needs and the requirements of the customers, they also need to make sure that the product is marketed in the best way. Only then will they be able to properly market the product and make sure that the demand for it increases in the eyes of the people.
If someone wants to sell the products that they have, then they need to look into the commercialization of their products in the first place. The companies might also try and influence the demand with the help of promotions as well as the prices.
Who here doesn’t love to sales? Think about the particular product that we talked about at the start of the article. Say that you want to get the product very desperately, but then again it is too expensive and just out of the budget that you have.
Now, this means that you will not be able to buy the product and will have to make a pass on the purchase of it.
However, when the company puts the same product on a sale or provides some sort of discount on the product, then there is no doubt that you will be able to get it on the budget that you have.
The example that we put forth right now is the perfect way a company will be able to influence the sale of a particular product and then increase the demand.
Components of Demand Management
There are four components of the Demand Management process-
#1. Forecasting
In this, a business will forecast the future demands of a particular product or service that they offer. Forecasting is done as per the current trend, projected sales, and analytical data of customer behaviour. It also helps businesses in preparing for any unexpected events in the future.
#2. Supply Planning
Businesses need to be prepared for the future requirements of the supplies. Being well aware of the requirements of customers, competitors’ influence and market trends help businesses in doing efficient supply planning.
#3. Demand Analysis
It is important that your demand forecasting is based upon the current sales data. Proper analysis of order history will help you do the right demand analysis for effective Demand Management.
#4. Sales and Operations Planning
For effective Demand Management, it is essential that you pay attention to the roles, operations, and importance of all the stakeholders in the supply chain system. Based on these reports, you can do effective Sales and Operations Planning to manage the demand requirements.
Understanding The Benefits of Demand Management
There is no doubt that demand management is one of the best tactics that are used by businesses these days. But there are still some people who might question the credibility of demand management and what it can do for the businesses and companies these days.
#1. Improvement of Product Forecasting
With the help of effective demand management, the companies can assist the supply chain managers by forecasting the production of the product in an accurate and also predicting the revenue of the company. Let us provide you with an example to make you understand the concept in the best sense.
When the company has made some predictions for a particular product or too many of them for the promotion that happens monthly, the demand planning allows two different things to happen.
With this process, a particular framework is created to properly investigate the forecasts and then identify the reason for the forecast amount being predicted in that particular manner.
Also, there is a systematic type of approach to the adjustments which are being made based on the company data and so much more.
But why is that so important? When a company has idle or excess inventory, then it can cause some losses to the business.
The retailers are always losing money, and it has amounted up to about $1 trillion. This is all due to the out-of-stock or overstocking problems that arise in the business sometimes.
With some assistance from demand planning, the business will be able to analyze if the business is properly able to meet all the promotional goals or it is just trying to justify the additional costs of having excess in the inventory.
#2. Increasing Supply Chain Scheduling
Businesses need to analyze and predict when their sales are most likely to occur. With the help of this particular information, the businesses will be able to plan their production, shipping, and warehousing schedules in the best way.
When a business has to do the mandatory maintenance shutdowns as well as the website reboots, then it will be able to avoid the different periods in the best way.
Apart from that, there might be some situations when you see that there is an increase in the demand for the products that you are trying to sell. In such cases, you can make sure with your team that there is a presence of enough stock so that you can easily meet the demands of the people out there.
If there are any particular delays which are anticipated in the fulfilment of supply, you will be able to reach the customers and then update them that their order will be fulfilled within a given moment.
#3. Optimize The Labor Management
No business will be able to taste the fruit of success if there are not many staff members who are present in the company.
So, it is important to make sure that you have an idea about the different staff members that are currently working in the departments of yours. With the help of demand planning, you will be able to get that kind of information very easily.
There might be some cases when your products have very high demand, but then the number of staff members that you have is very small and not adequate.
In such cases, you will not be able to fulfil the wishes of the customers, and there will be a decrease in the orders which are completed every single day.
So, when you aren’t really able to fulfil the orders of your customer in the designated time, there will be a disappointment on both sides. You might even lose the business from your customer as they will choose someone else over your services.
So, there is a need that you are successfully able to predict the peaks as well as the downs in the demand of your product so that you can properly plan the staffing requirements and the needs for your company.
When your products have high demand, you can have more staffing members, and during low demand times for the products, you can just cut back some workers and decrease your costs. Now, that is what we call proper planning and demand management.
#4. Efficient Management Of Cash Flow
Cash management is one of the most important aspects of a business. If your business is not able to manage its cash properly, then what is the use of having a business like that, right?
If you are not able to pay the suppliers as well as the vendors, surely you will encounter some losses as they wouldn’t want to do anything with you.
This is a particular situation that every single chain manager or company owners wants to avoid. When the vendors don’t want to sell you the products due to your inability to pay them, then the production of your company will be suffering from some serious losses, to be honest.
In such cases, there is a risk that your customers will also be angry because you will not be able to provide them with the materials that they need. Inability to fulfil the orders of your customers can further put your business at risk.
With the help of demand planning, you will be able to manage your cash in the best way. Your business will be able to find out the shortfalls which might happen during your sales.
With that kind of information in hand, the business will be able to stockpile the cash and at least make some negotiation for the loans so that they can pay their employees properly.
In Conclusion
Demand management is one of the most useful tools used by business these days, and if you want to be a part of this group, then you better start taking it seriously.
Understanding the process of managing demands and supplies is a must for ensuring the satisfied customer base that ensures sustainable growth for any business.
What according to you is the most important reason behind demand and supply gaps that a Demand Management Strategy should always pay attention to?
What are some of the challenges of demand management strategy?
I understood a lot on the benefits