Demand Planning by Alba Martinez



It is easy to have a small idea of what is demand planning in a company, but on the other hand, it is not as easy to know in which area of your company you should allocate it.


In this post, I am going to talk about demand planning in logistics. There is a definition that says, “ Demand planning is a multi-step operational supply chain management process used to create reliable forecasts”. If we take it into account, we will see that an efficient demand planning can conduct users to improve the accuracy of revenue forecasts, intensify profitability for a given channel or product, and range inventory levels with peaks and troughs in demand, for example.


Before telling you the role of it in logistics, I would like to mention some important steps that the company should follow in order to achieve a good demand planning study:


  • Importing historical sales data
  • Creating statistical predictions, which include customer agreements, intercompany standing orders and scheduled sales orders, among others.  
  • Integrating customers
  • Supply and demand collaboration
  • Re-examining data and regulating planning accordingly


As we have seen in past lessons, logistics has to collaborate with all areas of a company and the decisions that can be taken in this department can affect to a large degree of the whole firm. For this reason, demand planning plays a key role because depending on how a company manage their logistics on it, it can gain information about the level and stock variety of sold and supply deliveries, and also on the scale of transport demands. As a consequence, it will achieve an optimal reaction time to make the corresponding orders and a positive influence on customer service, so the company will have a good plan that allows them to have happier customers, lower costs in this section, shorter delivery time and other factors that will do a better coordination between the different areas.


In the next picture I want to show you how a company would achieve a good demand planning in its logistics, according with what I have explained yet in the previous part:


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While I was looking for a good example to put on the post, I found an interesting video about demand planning of Nestle, a famous brand around the world that provides food and drinks.


I will be briefly in its explanation because I prefer, if it is possible, that you spend five minutes to see the video in order to make it more dynamic and also to have a more detailed idea of its process. Nestle hasn’t been always a successful company in logistics, so for this reason, I think it is a not common example that can be fine to discuss.


Basically, what video explains is that their challenge for demand planning is to make sure that these products are sent to the right store at the right time. Nestle prepares accurate forecasts by analysing the level of information detail plus customer’s and distributor’s demand and presents a robust solution that helps the company to improve its demand planning.


As Geoff Fisher (Director of Supply Chain) said: “We were trying to be surgical but without the right tool set”.


It is because some time ago they didn’t pay enough attention to elaborate accuracy forecast, and consequently they made it very bad because they didn’t know how to do it in a correct way. So then, they realized that an improved forecast could result in a better customer service and a reduction of inventory costs, and they started to look for a technological partner in order to achieve it.


Finally, they found Sas, an analytical software that turned their forecasts more precise through providing more information about customers and promotions. With this software, the company has changed absolutely their demand planning at logistics, and now it is recognized to be one of the best firms in United States in this area. It is because they can make reviews and forecasts at different dimensions, for every different product, and also be able to make any change and adjustment if it is necessary, based on the reason of market intelligence.


Now they are able to see new answers on their routine process, because they have a more general vision of their company and its demand. It results in making better decisions by having the right signal across all products, channels and locations.


If you want to know more about it, you can find it on the next page:




Additionally, to complete the information, I want to show you its demand planning in a graphic found on their official webpage.

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Macintosh HD:Users:alba96mb:Desktop:Captura de pantalla 2017-10-11 a la(s) 18.59.50.png

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