In this article
Talk to our experts- Demand planning
- Demand planning is the process of forecasting how much of each product customers will order, and when, and turning that forecast into a plan the business can stock, buy and produce against. It starts from sales history, adjusts for known events such as promotions and price changes, and ends with one agreed forecast that purchasing and operations use.
How it works
Demand planning turns past demand and known future events into a forecast for each item, then hands that forecast to the people and systems that buy, make and stock the product.
Microsoft documents the process in the Demand planning app for Dynamics 365 Supply Chain Management as five steps:
The demand planning process, as Microsoft documents it
Import historical data, products, sites, warehouses, prices and other information.
Turn imported tables into time series by choosing data columns and time buckets, and shifting dates.
Use forecasting models, including your own machine learning model, or let AI pick the model that works best.
Adjust values for pricing, weather, promotional events and other factors, and collaborate on the forecast.
Export the finished forecast to any external system that can consume forecasts.
Microsoft notes that inaccurate forecasts and demand plans can lead to lost revenue and inefficiency in the supply chain. In its app, planners can edit forecasts at the corporate or product group level and then zoom in to see the impact at the regional and stock-keeping unit (SKU) levels.
Oracle describes sales and operations planning as a process that aligns product, demand and supply plans at an aggregate level with strategic and financial objectives.
Demand planning vs. demand forecasting
- Demand forecasting: the estimate itself, how many units of an item buyers are expected to order in each period.
- Demand planning: the process around the estimate. In Microsoft's process, creating the forecast is one of five steps; preparing the data before it, and reviewing, adjusting and exporting the forecast after it, are the others.
Example
A distributor sold 480 units of a filter over the last 12 weeks, an average of 480 / 12 = 40 units a week.
- Baseline: for the next 13 weeks, 13 x 40 = 520 units.
- Adjustment: a planned promotion is expected to add 60 units, so the plan is 520 + 60 = 580 units.
- Supply already covered: 150 units on hand and 100 incoming, 150 + 100 = 250 units.
- To buy: 580 - 250 = 330 units, timed so they arrive before the stock on hand runs out.
On Shopify
Shopify's inventory reports and inventory states give the sales and supply inputs a plan starts from:
- Inventory sold daily by product: the average number of items sold per day for each variant, calculated as quantity sold divided by the number of days in the period.
- Inventory remaining per product: an estimate of how many days remain before inventory runs out, based on the average quantity sold per day over the last 28 days.
- Incoming inventory: units on their way from transfers, purchase orders or apps aren't available to sell until they've been received at the location.
How Uncap helps
Uncap's guide to seasonal demand in agricultural ecommerce describes where agricultural sellers lose the value of good forecasting work: the forecast lives in a spreadsheet while inventory decisions get made separately in an ERP system or on paper somewhere else entirely. Closing that gap means syncing forecast and order data with actual inventory levels across every location a seller fulfills from. Uncap Connect keeps Shopify and your ERP in real-time, two-way sync, so inventory counts and order data stay aligned across locations.
Sources
Frequently asked questions
What is demand planning and how does it work?
Demand planning is the process of forecasting how much of each product customers will order, and when, and turning that forecast into a plan for stock, purchasing and production. It works from sales history, adjusts for known events such as promotions, and ends with one agreed forecast the business buys and stocks against.
What is a demand planning process?
Microsoft documents a five-step demand planning process for the Demand planning app in Dynamics 365 Supply Chain Management: import historical and product data, transform it into time series, create forecasts with forecasting models, review and adjust the forecast for factors such as pricing and promotional events, then export it to the systems that use it.
What's the difference between demand planning and forecasting?
A demand forecast is the estimate of how many units buyers will order in each period. Demand planning is the process around it: preparing the data, creating the forecast, adjusting it for known events, and handing the agreed plan to purchasing and operations.
