Demand Management: definition, processes, strategies and best tools

Demand management is all about keeping customers happy. However, while no business wants to let its customers down, there are always financial constraints in place. Consequently, building huge stock piles of inventory to satisfy potential customer demand which may (or may not) materialise, is simply not an option. So how should you anticipate, validate and prepare for future demand?

What is demand management?

Sensing, forecasting and ultimately managing demand is a challenge that supply chains are struggling to overcome in a current climate synonymous with volatility, rapid demand shifts, sustainability expectations and tight margins.

Effective or, better still, optimised demand management means being able to accurately forecast demand across complex customer and channel networks. It means being able to dynamically adjust forecasts in real-time according to new trends, seasonality, or unforeseen disruptions. And it means feeding those demand sensors into the rest of the end-to-end supply chain, knowing how a pivot in approach to demand would impact supply, inventory, labour, and profit margins.

This level of dynamism, real-time responsiveness, and end-to-end visibility, can only be achieved through automation, AI, and a best-in-class, holistic supply chain platform.

Objectives of demand management

The core objective of effective demand management is simply to fulfil customer expectations. No matter the sector or consumer demographic, the premise of optimised fulfilment remains the same: deliver what customers or end users want or need, when they want or need it.

Fulfilment capability is dependent on not just seeing demand, but weighing that demand against real-time capacity and bespoke company targets. The objectives of demand management are therefore to:

• Anticipate with precision, inclusive of market conditions, potential disruptions and alternative plans of action based on meticulous scenario planning.
• Optimise across channels, managing locations and products at a granular level to maximise sales potential and ensure constant availability.
• Remove the possibility of obsolescence without creating costly excess.

Benefits of demand management

Anticipating, validating and fulfilling demand with a level of precision that keeps customers happy and maximises profits is the ultimate goal. This endgame is built of numerous individual benefits along the way, however.

Optimised demand management means being able to maximise the sales margins of each and every product based on its profile, real-time demand for it, your current volumes, pricing and supply decisions. This insight and visibility of data across channels and items makes it possible to prioritise according to where real-time value lies, weighed up against the need to release inventory capacity.

Such end-to-end visibility also provides greater levels of agility, enabling companies to pivot according to real-time opportunity, while also being more resilient should disruptions occur. Ultimately, this all leads to a perfect product balance between stockouts and overstocks, ensuring continuous availability of products being sold at full price, after being stored and managed in the most cost-effective way.

The demand management process: its importance and components

What products are customers demanding? At what volume? How quickly? In-store, online or as part of an omnichannel experience? These are all questions that form the overall demand matrix from the customer side.

This then has to marry with: what do we already have inventory wise? What is the expiration life of those existing items? How much do we need to source to fulfil anticipated future demand? Do we have the capacity to store that extra volume? Where specifically is that demand and how can we balance the network effectively?

Add in labour, pricing, sustainability and a host of additional factors, and the complexity of demand management becomes clear. Indeed, the need for digital intervention and AI-driven decisions becomes clear.

Choosing the right demand management tool

But, where to start in identifying the right tool for the job?

Ideally, if you’re trying to get the full picture of how demand impacts the rest of your end-to-end supply chain in real time, then you want an equally holistic solution that makes those decisions and trade-offs automatically and centrally.

You want a platform that elevates your demand management capabilities across forecasting, cross-channel management, sensing, and planning. End-to-end visibility and data-driven insights then ensure profitability through unrivalled precision.

This single platform needs to comprise individual modules that tick all of the above boxes. For example, the automatic categorisation and classification of each SKU according to its specific behaviours, based on historic and real-time demand, allows for more dynamic forecasting at granular level. Advanced statistical models and machine learning algorithms should then help to adapt forecasts according to projected or real-time patterns or seasonal shifts. Those statistics should also be balanced against the real-time capability of your supply chain – current inventory, capacity, labour constraints, profitability targets, pricing and markdown decisions, promotions, and much more.

As explained, these granular decisions and trade-offs should also be representative of your own network and strategy, with a module dedicated to multi-echelon inventory optimisation (MEIO), network balancing across locations, or advanced segmentation of products in each area.

Ultimately, the right tool for you is one that can maximise your profits based on accurate data and precise projections. For that to happen, a single source of truth presenting the complete end-to-end situation is required.

Trends and future directions of demand management

Looking forward, it’s accepted that volatility will remain a constant, and that agility is therefore the order of the day. This isn’t just because of geopolitical disruptions, or climate issues, or material shortages. It’s largely down to a consumer base that craves more personalisation and variety in how they order and receive items. The same goes for businesses and their procurement activities.

By investing in a platform that can optimise demand management through elevated forecasting, sensing, decision-making and network balancing, your business can not only mitigate this volatility and unpredictability, but turn it into a competitive advantage.

Your C-suite will see profit margin increases almost immediately. Your operations team can prioritise with surety. Your IT team can thrive from more seamless and scalable systems. And your supply arm will be able to better align purchasing decisions with reliable demand data.

Simply, to optimise demand, you need a management solution that offers the full view through one picture… one platform.