Demand Planning vs Demand Forecasting. What’s the Difference?

In the world of supply chain management, the terms demand planning and demand forecasting are often used interchangeably. But is there a real difference between them?

Let’s start with a clear understanding of demand planning. Demand planning is defined as the process of assessing and forecasting demand for a product or service. But it also consists of the the delivery of a logistical strategy across the supply chain in order to best meet this forecasted demand. Demand planning software, powered by AI and machine learning, can deliver accurate forecasting models and help users enact a robust demand plan, meeting supply chain targets and increasing revenue in the process. The use of ‘forecasting’ in the above definition makes it easy to understand why so many people use the terms demand planning and demand forecasting interchangeably. But there’s an important yet small difference between the two concepts which is important to understand.

Demand forecasting is defined as the actual process of predicting the rise and fall in consumer demand and sales. Demand planning merely assesses a demand forecast and executes the supply chain operation. To understand this small difference conceptually, it’s useful to think of demand planning as the act of thinking about strategizing for the future supply chain demands, and that forecasting also accesses past insights and supply chain data to inform its future predictions.  

An accurate demand forecast is a prediction of demand based on a mathematical and statistical analysis of past demand. It’s a complicated mathematical process, which is why users need demand forecasting software powered by machine learning algorithms to manage and forecast demand accurately. Variables such as demographic trends, changes in weather patterns, marketing efforts or the introduction of new products can all be accounted for by the demand forecasting software system.

Why is Demand Planning and Demand Forecasting Software Important? 

Now you understand the difference between the concepts of demand forecasting and demand planning, let’s consider why the two processes are such important components for food and beverage business to achieve success. The benefits of accurate demand planning and demand forecasting include: reduction in overstock and under stock situations which impacts profit margins, improved accuracy in future profit expectations, and the improved capacity for aligning all business functions such as sales and marketing with supply chain management. Clear goals can be set for your business and every corner of your operations are informed and kept up to date with supply chain functions and targets.

Cashmere Systems are leading suppliers of demand planning and  demand forecasting software, powered by AI. Their cutting-edge software systems give food and beverages businesses across the world the competitive edge they need to thrive. Get in touch today to schedule a free demo!