09 Feb 6 Best Practices of Demand Planning for Small Businesses
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While large foodservice suppliers are maximizing revenue by accurately forecasting demand and supply needs, small businesses are still anxious about making a move.
Many manufacturers, suppliers, and local restaurants are worried about the cost or difficulty of introducing demand planning into their business. Unfortunately, this means they are being left behind as large corporations use big data to move in on their market share.
I’m Mike Lipari, Cheetah’s in-house demand planning expert, and in this article I’ll explain how small businesses can efficiently and effectively incorporate demand planning in their operations.
Table of Contents
KPIs for Effective Demand Planning
The benefits of implementing solid demand planning processes throughout your entire supply chain should already be clear. But how to go about measuring the impact of your new system?
Key performance indicators (KPIs) are an essential part of monitoring and evaluating every aspect of your business, particularly when it comes to sales. Key sales forecast metrics include:
- Forecast accuracy — You probably won’t get a 100% accurate forecast, but it should come close to your actual demand levels. Use metrics like the Mean Absolute Percentage Error (MAPE) to measure accuracy.
- Product lead time — The number of day it takes to sell a product from the moment of placing a purchase order (includes purchase, transit, receipt & sale of product).
- Inventory turnover & service levels — Reduction of stock-outs (leading to higher service levels) and overstocking (leading to higher turnover) are a fair reflection of effective demand planning processes.
- Faster customer order cycle — An effective demand planning system should help decrease the amount of time it takes for you to fulfill and deliver a customer’s order.
- Improved customer satisfaction rates — If all goes well, you should begin to see your customer satisfaction rates climb higher and higher.
It’s essential to use a combination of these metrics to get a complete picture of whether your demand planning processes are actually doing everything you want them to do.
Best Practices of Demand Planning
To set yourself up for success, make sure your new demand planning processes are effective and scalable. Here are 6 best practices to get you off to a good start:
1. There’s no need to be afraid of technology
Above all, demand planning is about providing your people with the right tools and environment to make data-backed decisions that will propel growth. Unfortunately there’s only so much anyone can do with a few spreadsheets or rudimentary software.
Without the right technology, you will not be able to process large data sets spanning multiple years. Since this is what your competitors – big or small – are doing, there’s no better way to get a competitive edge than by finding an advanced demand planning technology that’s tailored to your particular business needs and goals.
Many software solutions offer real-time charts, simulations, continuous modeling, streamline suggestions, and more. Before you get lost in the jungle, however, it’s best to consult with a provider that is familiar with your particular industry and business type.
2. Get the right data
Building a demand plan based on inaccurate or incomplete information is a recipe for disaster. Before you make any decisions, make sure your numbers are right. Moving forward, implement a data collection process that is both effective and reliable.
3. Get other people involved
Regular communication and collaboration between all the relevant players should be encouraged every step of the way. Demand planners, suppliers, sales and marketing, operations, finance, and any other departments that either impact or fulfill demand should be involved in the process or at the very least be consulted before implementation.
4. Clearly define roles
Supply chains are complicated enough as it is. With demand planning, you’re inviting even more people to get involved and work together. To prevent stakeholders from getting lost in the process, make sure each person has real-time visibility and that responsibilities and priorities are understood completely.
Demand planning won’t work if the people involved don’t fully understand what is required of them and how this benefits them and their work.
5. Be conscious of new opportunities
6. Keep demand and supply in sync
Cheetah Is Here to Help You Make the Leap
As a small business, exploring and adopting new tech can be scary, especially coming out of 2020. There are things you can do to get ready and the right technology partner will be able to assist you in understanding the process and the impact it will likely have on your business and people.
As a wholesale food distributor in the Bay Area, we at Cheetah are intimately familiar with what it means for a small business to make this technological leap. We also know the type of problems most small distributors, grocers, restaurants, and other agents along the supply chain are struggling with.
That’s why we’ve built a demand planning platform that is easy to use, impactful, and tailored to the specific needs of small and medium businesses. Our technology combines historical sales data with signals around other demand drivers, such as seasonality, holidays, price sensitivity and other pricing information, marketing campaigns, competitive landscape, weather forecasts, the lead time from your suppliers, and more.
We built our technology for our own use and it has allowed us to enhance our bottom line by reducing product waste, reducing stock-outs and overstocking, and making sales teams more efficient.
The most important thing we’ve learned while building our demand planning solution is that we need to adjust the solution to the available data, no matter the format and system where that data currently resides. In other words, from simple spreadsheets to complex ERPs, Cheetah can gather relevant data to power our demand forecasting artificial intelligence solution so we can output actionable insights tailored to any business.
For more details on what demand planning can do for your business – get in touch with us.
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