Customer Demand Planning

Customer Demand Planning (CDP) is a business-planning process that enables sales teams to develop demand forecasts as input to service-planning processes, production, inventory planning and revenue planning.

Definition of CDP

CDP is an important aspect of managing value chains. Generally, the first step of CDP is to forecast product demand. A manager can plan resource deployment in accordance with the resulting forecasts. It's a bottom-up approach vs. top down planning. Associated risks with this method are: Low forecast accuracy and numbers of planners required. There are various software systems created by companies such as Dynasys, Avercast, Demand Solutions, RightChain TM, SAS System, Agentrics, Manugistics, Oracle, Petrolsoft Corporation (now Aspen Technology), StatSoft, ToolsGroup and GMDH Shell that help businesses forecast demand and plan operations. To test the added value of implementing bottom-up approach, SAP APO applications are providing simulations functionalities to estimate the resulting Demand Forecast Accuracy (e.g. POS sales ; Sales invoices ; shipments, etc.)

In the manufacturer to retailer model, customer collaborative partnerships have been become more common since the 1990s. Although there was a lot of industry support behind CPFR (Collaborative Planning, Forecasting and Replenishment), manufacturers and retailers are adopting different versions of collaborative forecasting and replenishment strategies. These include Collaborative-VMI, CPFR, Account Based Forecasting, CMI, Shared Single Forecast and replenishment etc.

The Demand management in the 21st Century is a more complete view of the business. Demand Management is not merely forecasting. Demand management strives to manage all the activities associated with discovering markets, planning products or services for those markets and then fulfilling the customers ‘demand’. It is an integrative set of processes across, not just the enterprise, but the trade partner network. Do you really understand your market? Are you sure you know who your customer is and what draws them to your business? And when they get there are they actually happy with your assortment—your product offering and service? And even if they buy, are you getting the wallet share you could be getting? These are profound questions for any business.

Most businesses think they can answer the first question, somewhat. They have a characterization of their customer, an archetype, a segmentation model that describes their customer base. But when you probe further into even the best firms, they admit that these models are often insufficiently mapped to the actual customers who spend with them. And they have few programs, if any to access those who don't spend but could be spending.

Discovering markets

Discovering markets requires a sophisticated and integrated set of programs and processes. They provide the information necessary to analyze the mindset of potential customers, and then draw them in to become paying customers. Now add the challenge of managing the what, when and how much of the millions of SKUs should be designed, made, distributed, and displayed. Again add pricing and inventory optimization applications, which help determine stocking and pricing strategies, by segment, by territory, by channel, and down to the shelf level. You will very quickly realize that Merchandise and Assortment Planning is the essential workhorse of retail demand management. The challenges and complexities faced by the retailer are somewhat different than the challenges faced by suppliers (manufacturers and distributors). Therefore, the demand management technology for the merchant is somewhat different than for the brand or manufacturer on the supply-side. Customer Demand Planning aim at matching Customer supply planning logic and imply CPFR type collaboration. Areas components of Demand Management include Customer Experience, Demand Creation, Inventory and Pricing Optimization, Channel Management, Sourcing, Transportation Optimization and Advanced Practices in Technology. [1]

Customer Demand Management today is supported by a new generation of web technology—Marketing Automation—or Demand Creation applications. New models exist for customer segmentation.

Another definition

Another definition states Demand Planning requires the integration of point of sale data from retailers. Most consumer goods companies receive point of sale data from the retailers, but leveraging it to maximize their forecasting efforts can not be done effectively unless the data is clean, integrated, synchronized and harmonized with internal data and other data provided by retailers."

See also

• Demand management
• Forecasting
• Inventory control

External links

• Website of Chainlink Research

• Lee J. Krajewski, Larry P Ritzman, Manoj K. Malhotra: "Operations Management: Process Chain and Value Chains, 8th Edition", page 521. Pearson Education, Inc. 2007, ISBN 0-13-169739-0