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Retail Demand Planning – A Complete Guide

Tired of guessing the amount of stock to order?

Do you often find yourself stuck with unsold merchandise or constantly running out of stock?

Well, effective retail demand planning is the solution you need.

It’s the process of using data and analytics to determine customer demand and adjust your inventory levels accordingly. With accurate demand planning retailers can avoid common retail problems like overstocking and out-of-stock issues. This guide aims to help retailers understand the impact of demand planning and how to incorporate it into their retail operations.

What is Demand Planning?

Retail demand planning is a smart way to determine and meet the demands of customers. In the retail world there exist various challenges including seasonal, cynical, and other market fluctuations.

These challenges can have a huge impact on supply levels and inventory, with accurate demand planning, retailers can cope with these challenges and ensure their inventory is always at the right levels.

Importance of Retail Demand Planning?

  • Prevent Stockout

    In the retail business, nothing can be as annoying as going out-of-stock. This situation not only frustrates your customers but also costs you a big chunk of money (Since customers are unable to make a purchase).

    But with on-point demand planning you can determine the exact amount of inventory you need to meet the customer demands. REPLAN is one smart retail planning solution that helps you with ordering the right amount of inventory at the right time.

  • Minimize Excess Inventory

    As we know, going out of stock is a critical situation but having too much can be as awful. With access inventory, you have to pay for storage costs, and your cash is tied up with the products that are not generating any money.

    What’s worse is your stock might expire before you even have a chance to sell it. With demand planning you can stock up your inventory with just the right quantity to meet customer needs and avoid spending unnecessarily.

  • Improve Customer Satisfaction

    As we already mentioned above, going out of stock not only causes lost sales but also leads to frustrated customers. By investing time and resources in demand planning retail businesses can meet customer demands and improve their overall satisfaction.

5 Effective Methods To Do Demand Planning in Retail

Historical Data

Also known as linear regression, this method utilizes historical data like identifying patterns and trends in customer behavior to identify future demands. Retailers can make use of this data to adjust their production, pricing, and inventory strategies.

Moving Average

Moving average is yet another method that calculates the average demand for a product during a specified time frame. The moving average can be categorized into 3 subcategories including:

  • Simple
  • Exponential
  • Weighted

CPFR (Collaborative Planning, Forecasting and Replenishment)

This process includes collaboration among multiple entities including manufacturers, suppliers, distributors, and retailers working together to plan, forecast, and replenish inventory.

This process not only fosters close relationships among supply chain partners but also improves the accuracy of sales and order forecasts.

Monte Carlo Simulation

Using this method retailers can simulate different scenarios based on probability distribution to estimate future demands.

This method takes into account various factors such as lead time, inventory levels, and supply chain disruptions to determine a range of possible outcomes. Considering these outcomes retailers can form their strategies and mitigate potential risks.

Seasonal Trends

Seasons play a crucial role in the demand for some products. For instance, products like jackets, gloves, woolen clothes, etc are in high demand during winter. You can anticipate these seasonal shifts and make planning for demand in advance.

How Retail Demand Planning Is Different from Retail Demand Forecasting?

While demand planning and forecasting are often used interchangeably, they both are distinct concepts. Though both are used to estimate the level of demand a store will experience, demand planning works on a deeper level.

In simple words, we can conclude that demand forecasting is a subset of demand planning. Demand forecasting makes use of various data points like sales, inventory performance, etc to forecast demand. However, demand planning goes deeper and ensures all steps are in place to meet the desired demand.

Conclusion

Effective demand planning is crucial for retailers to ensure they meet customer demand while minimizing inventory costs. By using data analytics and forecasting tools like REPLAN, retailers can better anticipate consumer behavior and adjust their inventory accordingly. A successful demand planning strategy can lead to increased sales, reduced waste, and improved customer satisfaction. By implementing a robust demand planning process, retailers can stay ahead of the competition and achieve long-term success.