Running a successful business in the 2020s is a herculean endeavor, to say the least. One of the biggest reasons for this increased difficulty is globalization and the limitless potential of the global market. Businesses now need to think of more than just their locality; the world has become a competitive battlefield for businesses.
With physical distances becoming less of a problem, supply chains have become one of entrepreneurs’ biggest areas of concern. Products are no longer just manufactured in your local factories. Instead, even as a simple retailer, your store will likely be full of merchandise that has been through many corners of the world.
Take the iPhone, for example. PAT Research drew a comprehensive map of the supply chain that Apple has created, and it is a marvel in itself. A single iPhone travels the world, from South Korea to Italy to Japan, and finally assembled in China, where it is sent across the globe.
All of this did not happen magically. Someone, or a team of supply chain specialists, sat down in a room and figured out how to get an iPhone to whoever wanted one. The overall mechanics of such a supply chain are a subject for another time. Now, let’s talk about the preliminary part of how such a supply chain system came to be.
It all starts with demand planning and supply planning. The terms are very casually thrown around in the business landscape, but it is important to know their differences.
In this blog, we will compare the two similar yet different planning phases of supply chain planning to illustrate just how much thought and effort goes into something as simple as getting your iPhone to you.
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Demand Planning vs. Supply Planning: Two Halves of a Whole
Demand planning and supply planning may feel like some loaded jargon with deep technical supply chain implications., But the truth is that they mean exactly what the name says.
Demand planning is making forecasts and predictions of product demand based on collected data. In contrast, supply planning is figuring out how exactly those projected demands will be met. They are complementary processes, and each informs the other in a symbiotic manner.
Perhaps an example is appropriate to drive the point home. Consider that your business’ latest product has unfortunately been underperforming., You had imagined a demand of 1000 units per week. But you’ve only sold half that amount in double the time. Now, you are left with a lot of excess product, recurring inventory management, and storage costs, on top of the costs you incurred to procure the supply. In this case, if you were operating with a demand planning and supply planning expert, they could have saved you all this headache.
With that said, let’s get back to the task at hand: comparison.
Comparing demand planning vs. supply planning is more to illustrate how these processes work and differ. Still, the ultimate fact to remember is that they are both halves of a single supply chain planning process, and you cannot do without either of them. Disclaimer: This comparison is mostly just for explanation’s sake.
Demand Planning vs. Supply Planning: Key Distinctions
|Demand planning||Supply Planning|
|Demand planning involves dealing with: -Consumer demand data,
-Historic trends, and
-Market trends to make a plan of action
|Supply planning is more internal, dealing with:
-the business’ ability to meet demand expectations.
Data analysis includes production capacity, supply costs, logistic factors, etc.
|Demand planning is purely theoretical and data-driven. It tells you how much you can expect a product to be in demand but not what you can realistically fulfill.||Supply planning is practical. Instead of dealing with hypothetical demands, supply planning concerns how much of those demands can practically be satisfied.|
|Demand planning is never concrete. You can only approximate how much the demand will be. It’s always risky.||Supply planning is concrete. You know exactly how much demand your supply can meet, and whether it lives up to the demand plan is up to chance.|
Demand planning vs. supply planning is an interesting comparison, but overall, the two are really just part of the more extensive supply chain process. Entrepreneurs can read more about demand planning vs. supply planning here, where our experts break it down procedurally.
What’s important to take away from this article is the importance of demand and supply planning. Your business would be in deep trouble if you were not doing your due diligence with demand and supply planning. At the very least, consult with an outsourced demand and supply planning specialist before you shoot down the prospect. By going outsourced, you stand to save big while also leveraging world-class supply chain support. And if you’re more comfortable going in-house, then so be it. The bottom line is that demand and supply planning is vital for operating a healthy business going forward.