A company that’s able to align its production with the evolving market demand is one that’s positioned for success.
Demand management is a method used by many companies to achieve this alignment between supply and demand. This data-driven approach aims to understand customers and adjust production accordingly.
By creating a direct connection between forecasted demand and the supply chain that fulfills that demand, the management process helps companies gain more market share and increase long-term profitability.
What is demand management?
Demand management is an established method used to forecast and meet customer demand for a company’s products or services.
With a focus on customers, demand management draws from a range of market data, including historical sales, demand patterns, direct competition, industry trends, and current market conditions.
This collected data is then analyzed to develop an accurate demand forecast, and determine any changes that need to be made for the company to supply the projected demand.
The purpose of demand management is to close the gap between a company’s marketing and supply chain functions, resulting in more efficient operations and the potential to capture greater market share.
How does the demand management process work?
The demand management process can be divided into four main steps: modeling, demand forecasting, demand planning, and supply chain planning.
Modeling
As the first step in demand management, modeling establishes a clear understanding of the target customer and market behavior. It looks at past performance and other relevant data to create more accurate future predictions.
The data is then used to inform the company’s existing demand model. By creating a single source of consolidated data at the start of the process, modeling helps reduce risks and create a more effective demand management process.
Demand forecasting
Forecasting builds on the current demand model, using internal data from the company’s sales and marketing channels, inventory management, and customer orders and returns. Forecasting helps estimate customer demand for the coming weeks, months, quarters, or even the next year. Inventory forecasts act as a guide when planning the company’s supply chain strategy.
Demand planning
Demand planning translates forecasts into an action plan and coordinates with all the necessary teams to make it happen.
While demand planning can encompass some of the analytical aspects of forecasting, but it’s mostly considered a supply chain management function. For example, demand planners focus on prioritizing the products to manufacture, the target quantity of each SKU, and the production schedule.
Demand planning looks at day-to-day production and ensures a company is capable of fulfilling demand in a way that maximizes profit.
Supply planning
Once the demand strategy is in place, supply planning ensures that operations are carried out as efficiently as possible. This final step of demand management oversees every aspect of production and logistics, from raw material procurement to inventory and delivery tracking.
With all the research and time involved in demand management, supply planning plays a critical role in fulfillment and overall performance optimization.
Benefits of effective demand management
Whether you’re a product manufacturer or service provider, the ability to anticipate future demand and adjust your supply accordingly is critical to business success. Having an effective demand management process in place brings several short-term and long-term benefits:
Reduce unnecessary costs
A major advantage of data-driven business planning is being more confident in your customer knowledge and supply chain strategy. By manufacturing only the type and quantity of products that are likely to sell, you can eliminate unnecessary costs and reduce the likelihood of ending up with either stockouts or deadstock inventory.
Increase operational efficiency
The process of demand management starts with analyzing marketing and sales data and ends with overseeing supply chain operations. By bridging both functions, a business can reduce any gaps in communication and increase operational efficiency.
Create a competitive advantage
Companies with a reliable order management system can better anticipate and plan for inevitable market changes. Whether it’s rising trends that require a scale in production, or decreased demand that prompts the exploration of new products, demand management allows you to build a competitive advantage by anticipating market needs.
Improve customer satisfaction
The ultimate goal of demand management is to meet customer demand. By having stock of what customers want, when they want it, you can deliver a seamless customer experience. People are much more likely to return to companies they know can fulfill their orders, increasing customer retention rates and lifetime value.
Greater revenue and profit margins
Demand management helps tailor your supply chain to maximize inventory turnover and revenue generation. By proactively dedicating resources to the products and services customers want rather than what is assumed to sell, companies increase the odds of earning back their investment and generating greater profits.
Demand management best practices
With so many steps and stakeholders in the demand management system, it helps to have a clear strategic approach in place. Here are some of the best practices used by other companies in their demand management process:
Assign a designated demand manager
As with all other strategic initiatives, having a dedicated manager leads to a more effective and efficient process. Demand managers or teams should have clearly defined roles and responsibilities and access to all the resources needed to accomplish their goals.
Get the entire company onboard
Demand management involves the cooperation of several teams, from marketing and sales to finance and supply chain operations. Foster alignment between these functions early on, explaining how demand management will work and why it’s important to the company. Detail exactly what will happen and what’s required of each team to implement the demand management system.
Use software to facilitate routine tasks
A best-in-class business management platform like QuickBooks Enterprise can help organize all the demand management processes and facilitate team coordination. Essential data can be accessed in real-time and automations can reduce the time and resources spent on routine tasks.
Continually improve your demand management
Demand management is a methodology that becomes more valuable in time. As companies continue to assess their customer demand, they naturally find new ways to improve the process. In time, companies will better understand their customers and discover the best strategies to expand their existing market share.
How QuickBooks Enterprise supports effective demand management
QuickBooks Enterprise supports the challenges of growing business demand, from data collection to supply chain fulfillment, with automated tracking and mobile barcode scanning to facilitate the data collection needed for forecasting.
Once management decides what products should be manufactured to supply market demand, QuickBooks Enterprise can efficiently allocate the exact labor and resources needed to operate the new supply chain workflow.
With a full suite of features, Enterprise streamlines all the data collecting, industry-specific reporting, and sales order fulfillment from start to finish. All this is run through a single consolidated dashboard to improve company decision-making and accomplish the strategic objectives of demand management.
Final thoughts
Faced with ever-changing trends and market fluctuations, companies rely on demand management to determine any necessary adjustments to their supply chain.
Demand management strategies involve collecting and analyzing key data, applying insights to forecast demand, and streamlining business processes through a cross-collaboration platform that connects all teams.
By proactively focusing on upcoming and future demand using a QuickBooks Enterprise, growing businesses can optimize their operations to meet their customer’s needs and increase overall profitability.
