Demand management is one of the critical business processes for boosting revenues. Today, a large number of companies are focusing on developing the tools for this management. Two very important factors, namely customer retention, and company financial performance, largely depend on its management. As a result, the need to adhere to best practices for improving the overall performance of the business for the end-to-end supply chain has increased. It also provides a solution for all the functions that are affected by the process. But before digging deeper and explaining how to improve your processes, let’s understand the concept of demand management.
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What is demand management?
Demand management is not a statistical forecast, but it is a process that supports the objectives of an organization. It adheres to the tenets of best practices. It involves the review of projections using a method called “management by exception”. It is the development, reporting, and finally publishing of appropriate metrics of error that reflect the perfect business environment.
What are the core components of demand management?
A good demand system must include the following components:
- The engine of the statistical forecast that consists of both quantitative and rule-based methods
- Management interaction that includes qualitative methods and management by exception
- The system of performance management that includes feedback, publication, and accountability
- Information organization that has visibility into data and analysis capabilities through graphs
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Demand management best practices
Effective management of demand supply is essential for the profitability of a company. It is a business process that enables all organizations to respond to emerging situations in an effective and efficient manner by maintaining the right balance between supply and demand. This can be achieved by following some of the best practices, which include:
Identifying and focusing on the objectives
This practice includes the following:
- Inventory reduction
- Maintenance of customer service levels
- Monitoring inventory of unavailable or discontinued items
- Proper pipeline fill of new arrivals
- This management process should be consistent across the enterprise
- Assigning ownership of the process
- Identifying and including organizations in the process that are impacted by the plan of demand
- Implementing a consensus and collaborative procedure
- Defining accurate points of aggregation to support objectives of the organization
- Identifying the frequency and timing of the forecast review cycle
The practice of defining forecast management by exception
- Identify appropriate measurements of error forecasting
- Implement a procedure to disseminate the result of the forecast
- Review the complete process regularly for improving accuracy, performance, and efficiency
Determine and implement tools to support the process of management
- Statistical forecast methods must be followed including rule-based methods
- Error metrics must be examined regularly
- Reporting methods should be followed for accurate results
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