Demand Planning vs. Demand Forecasting: The Difference and Why It Matters

Preparation is key to success, especially when it comes to your supply chain. If you want everything to go off without a hitch, you need to be able to anticipate what you’ll need, where you’ll need it and when. To that end, businesses typically engage in a number of strategies aimed at making sure all their pieces are in the right places at the right times. Two of the most important of these are demand planning and demand forecasting. Although they sound like the same thing, they’re not. Understanding the difference between demand planning and forecasting helps your business ensure it is fully prepared for what’s to come.

What is Demand Forecasting?

Predicting what your customers will need and when is crucial if you want to be successful, and this is where demand forecasting plays a critical role. This process involves analyzing historical data concerning customer demand and making predictions that can guide decisions about inventory planning, procurement and logistics. Today’s advanced supply chain software often includes advanced algorithms that make this process faster and more accurate.

What is Demand Planning?

Demand planning builds upon forecasting by considering demand as just one part of the overall supply chain picture. It also takes into account factors beyond anticipated demand such as market trends, seasonal changes, potential disruptions and current capacity levels. The objective of demand planning is to make sure what your company has at hand will be in line with what the demand is expected to be.

Key Differences Between Demand Forecasting and Demand Planning

One good way to help understand what makes demand forecasting and demand planning distinct is to think of them this way:Forecasting is concerned with what you expect to happen, while planning is developing a plan for being prepared for it.

In other terms, forecasting tends to be focused on the short term, trying to use data to predict what could happen in the immediate future.On the other hand, planning takes a long-term approach and covers more ground, developing strategies that involve all areas of the supply chain to provide a cohesive response to demand expectations. Demand feeds into planning, and both are absolutely crucial for ongoing success.

Making the Smartest Supply Chain Decisions

Knowing the weather forecast for the day really doesn’t help you much if you’re not prepared for what you’ll face. If you know it’s going to rain but leave your umbrella at home, for example, you may as well have never checked the weather report in the first place. Likewise, simply predicting what your customers will want in the immediate future does you no good if you don’t take the appropriate steps to ensure you’ll be capable of providing it.

This is why it’s important to utilize both the demand forecasting process as well as the demand planning process in your operations. Without the right tools in place for predicting future demand and aligning your supply chain to it, you’ll most likely be left scrambling to keep up with your competition and watching customers slip away as a result.

Forecasting and demand planning software that can help you keep track of everything can be a huge help. Fortunately, ketteQ’s solutions offer the tools and capabilities you need to harness the power of predictive analytics and put them to their best possible use. If you want to learn more about how ketteQ’s powerful supply chain planning and forecasting platform can make a difference for your business, reach out and talk to one of our experts today.