Businesses are always looking for ways to cut down on their costs. Whether it’s sourcing from new suppliers or reducing their delivery times, there are many ways an entrepreneur can raise their bottom line- one of which is demand management.
With the rise of eCommerce, more businesses now use digital tools to help manage their overall operations. Management and logistics software has powered businesses by automating and streamlining their processes and tracking important data and statistics.
These analytics give business owners an in-depth look at how their customers respond to their initiatives and strategies. Decision-makers are empowered more than ever since they always have data as evidence and a benchmark for plans.
Volatile situations such as the supply chain crisis and the ongoing COVID-19 pandemic demand businesses to be more resilient against sudden changes in global markets. Operations should have streamlined processes that are flexible enough to adapt in a short amount of time.
It can be challenging to think of new and innovative ways to help keep business costs down, but leveraging data helps level the playing field.
How Does Demand Management Work?
Demand management (DM) is a planning methodology that aims to forecast, realize, and determine customer demand. It requires close coordination between operations and marketing to form a comprehensive strategy.
Ideally, inventory levels should be sufficient to meet customer needs, without leaving a surplus. This concept coincides with“just-in-time” manufacturing.
Demand Management is closely tied to logistics as it sets the pace of what scope is needed to move products and inventory. It goes without saying that to optimize your supply, you must first understand your demand. If you can successfully plan and anticipate customer demand, this helps eliminate waste in your processes while achieving shorter delivery times.
Some key aspects of Demand Management include the following:
1. Product Portfolio Management
These processes involve managing everything about your product, from its introduction to eventual phase-out through end-of-life planning. Different product lines will be interdependent on each other. Businesses must account for how their new goods will affect demand for existing offerings and how an optimal mix can maximize market share.
2. Statistical Forecasting
Forecasting for supply chains and consumer demand requires historical data. Demand Management uses advanced algorithms to identify specific trends and outliers. Seasonal trends can also be assessed when with statistical forecasting. It’s important to gather accurate data to help you understand the numbers and factors of business performance. Without hard evidence grounded on actual sales or consumer interactions, assumptions are hard to make.
Both qualitative and quantitative data are the foundations of solid statistical forecasting. Qualitative data are factors that help define your customer base. These range from demographics, and interests, to geographic locations. It also answers the question, “who is your customer?”. The insights of industry leaders and global trends also form valuable qualitative data.
Quantitative data represents sales numbers, revenue, and even stock levels. It forms the basis of understanding what your customer wants and when they want it.
3. Trade Promotion Management
Companies should focus marketing efforts on building a following of loyal consumers. These all influence consumer demand from events to promotions by generating value for them and fulfilling wants and needs. Special discounts and giveaways are common strategies that brands employ to create awareness and connect with consumers.
Customers shopping online can purchase at any given moment. It is a big blow to your revenue stream if you cannot fulfill orders due to a lack of inventory.
“A successful supply chain depends on an accurate forecast. Demand planning plays an essential role in ensuring that product is delivered to the consumer on time and in full.” – Ryan Sprague, Customer Supply Chain Manager, Campbell Soup Company.
Demand Management is important since it keeps your businesses ready to tackle unforeseen challenges while optimizing costs. DM cannot be researched externally or searched online as each business is unique. You will need to dive into what customers look for when choosing your brand.
Using Demand Management for eCommerce
As with any business plan, you might first identify a goal. Doing this contextualizes the data you gather and helps you better understand what you want to achieve. You can form these goals by asking questions such as “what do we want to sell?” or perhaps “do customer expectations affect sales?”.
In the fast-paced world of eCommerce, you will need every advantage you can get to get a leg up on the competition. Demand Management helps optimize your supply chain by determining which products or services will perform best. It can also tell you which markets you can get the most significant reach. Demand management can maximize opportunities and minimize risk.
1. Reducing financial risk
Budgeting can be much more accurate if you better understand customer demand. Historical data can predict when items are more likely needed, such as specific clothing for seasons. Better order planning lessens dead stock or items that are never sold. It also cuts down on wasted storage costs and optimizes space in your warehouse.
By timing inventory purchases better through data awareness, you can make smarter financial choices. Working with factual data can significantly improve cash flow, profit margins, and operating costs when you have a solid basis for your decisions.
2. Managing customer expectations
According to Shopify, in 2021, 23% of shoppers abandoned their carts because there was no guaranteed delivery date. It was due to a lack of inventory or poor logistics visibility. Modern consumers demand better service when shopping online, and even the slightest hiccup can result in a domino effect of losses. The need for faster fulfillment is real, with 49% of online shoppers willing to pay more for same-day delivery.
With demand management, it is crucial to understand how much stock you have on hand, where you can source them when to replenish, and the fastest way to fulfill them. Well-stocked, constantly available items can maintain a positive brand reputation by keeping customers happy.
3. Decreasing inventory expenses
Maintaining an ideal amount of items in your inventory is always a challenge. You may be racking up high warehousing costs if you keep too much. Too little, and you may end up disappointing customers. Modern warehouse and inventory management systems can track how much stock you have on hand. It also tells you when to replenish. You can create a healthy supply chain with no wasted space. Products will move efficiently from off the shelves and into customer homes.
4. Setting a more competitive pricing dtrategy
Forecasting helps entrepreneurs and retailers understand the demand behind a product. Demand management will then dictate when it’s best to lower or increase prices. You can take advantage of trends where customers are willing to pay more for a specific product or service. In the same way, discounting items can help create demand for a product you want to sell more.
Matching sold goods to cash flow can help you identify which investments are best.
5. Utilizing data for accuracy
With demand management, it can be overwhelming to deal with so much data and decisions. After all, planning for the future is no easy feat. Technology and outsourced services such as third-party logistics (3PL) can help make it easier for you.
When it comes to managing the right inventory levels, digital warehousing automatically tracks all the items in and out of a storage facility. These movements get updated in real-time on an app or dashboard you can access anywhere, even on the go. Additionally, going automated is an excellent help when it comes to restocking, as you can get notified when an item is about to go out of stock.
One of the challenges of Demand Management is working with accurate data. If you base crucial decisions on out-of-date sales, your planning can quickly go wrong. Integrating inventory management software and automation into your logistics processes reduces human error. It will also provide reliable tracking and product insights.
Artificial Intelligence (AI) aggregates all your stored data and runs them through advanced statistical models to help with forecasting. It can present you with a comprehensive report that outlines which of your products have been performing best. It will also tell you which items can use a different marketing strategy. Creating personalized experiences for your customers is possible when you have the correct data.
Choosing to outsource keeps your business operations flexible and diverse. A 3PL can contribute to your decision-making with expertise in fulfillment and logistics. It’ll give you more confidence to craft competitive demand planning models.
Demand management is essential for scalability and sustainable business growth. Forecasting is always tricky. But having a well-connected supply chain that is strengthened with agile practices is a safe way to go about supply and demand changes in the market.
ZhenHub offers a complete digital suite of logistics software solutions. With a powerful eCommerce platform that provides real-time insights on stock movement and the ability to forecast market demand, get full visibility of your business operations. Get started when you sign up at our website.