Mastering The Art of ERP Demand Planning
If you are a manufacturer, no matter the size, location or product, accurate and thorough demand planning should be one of the first objectives you strive to achieve within your organization. Knowing just how much product you need (and where that product needs to go) in the future is invaluable. With that information, you can engage in efficient lean manufacturing and pull-planning strategy, whereby you create production workflows backwards from necessary demand. This means that your business will only be ordering and paying for exactly the amount of raw materials you need, scheduling production lines and employees when they need to be running, and shipping out product that you know will be bought. This is the art of ERP demand planning, and it is totally possible for any business currently using or looking to implement an ERP system.
With enterprise software and the power of predictive analytics, you can gather and manage all of the information need to become a master at ERP demand planning, and harness the functionality of an ERP system to give yourself a peak into future demand and piggyback on that knowledge to new heights of revenue and company growth! Keep on reading to learn more about the fine art of ERP demand planning, and how you can become a wizard at it.
Historical Data = Future Knowledge
One of the greatest assets of a robust ERP system is data collection and storage. Historical data about your clients can be drawn and correlated in totally new and powerful ways. Just think—if you’re able to log client purchasing habits and cross-reference that with product life cycles and seasonal demand changes, you will know when your customers will need more product, where to ship new stock in line with increased demand, and who to approach if a schedule maintenance for one of your items is coming up. What’s more, your historical data will hold great power when it comes to ERP demand planning, and one of the major ways in which you can extract it is with the help of predictive analytics software, which will take a 360-degree view of past transactions and build that information into an authoritative ERP demand planning tool. Keep reading for more on predictive analytics and ERP.
With the help of your historical data, your ERP system can make use of a predictive analytics module or function that will look back on all of your past transactions, clients, shipments and sales and determine and leverage that information to see into your business’ future. By mapping geographic, demographic and seasonal trends over a long period of time, your ERP will be able to project this data into the future and have you have ready for whatever demand you might have coming in your future.
Your software’s predictive capability will help your business build a thorough and precise ERP demand planning strategy that factors in not only the past, but your present production levels, revenue flow and future growth to forecast what product you will need to produce, how much of it to make, and where to ship it. This means less time, and raw material, wasted on products that won’t be bought, and those products won’t be taking up space in your inventory. In fact, ERP demand planning is a fast-track to helping your facility achieve a totally lean shop floor!
Achieve Lean Manufacturing
One of the most enviable benefits of an accurate demand planning strategy remains the opportunity it provides for businesses to work towards a lean manufacturing facility.
Lean manufacturing principles strive to cut down on waste, unnecessary costs and extraneous effort on your shop floor and throughout your entire business. Excess production and inventory can often be one of a company’s largest sources of waste, and ERP demand planning is one of the most effective ways to reduce them. If you know how much to produce every day, every quarter and which markets to ship to, you know exactly how many manufacturing lines need to be active, how many employees to schedule and how much raw material needs to be ordered. This form of pull-planning, working backwards from anticipated demand to arrange the processes that will go into meeting that demand, can theoretically reduce your inventory to zero when combined with the refined predictive analytics of an ERP module.
Less Waste = More Of Everything Else
It stands to reason that once you cut back on waste within your business increase your revenue flow and will free up space and time for your employees, facilities and production lines. This means innovation and mission critical work will take priority, rather than rote work or tasks that would be more efficient and less time consuming if automated. The result; extra money for investment into new ventures or greater efficiency on the shop floor, more employee time to drive growth and change within the business, and a happier workforce as they know that every minute of their time is going directly towards productive activities for the company. ERP demand planning will be a boon for your customer service department as well; you will have exactly the right products they are looking for at the right time, meaning happier clients that keep coming back.
Utilizing enterprise software to master the art of ERP demand planning is pretty much a no-brainer, and is totally possible no matter the size of your business or the horizons you are looking to grow the company towards. With the help of all of your historical data and the power of predictive analytics, businesses can lean down their manufacturing floor and reinvest those savings into generating all new ROI and improvement in the company.
For more on how to take advantage of ERP demand planning within your own business, contact an expert at Datix today!
1 thought on “Mastering The Art of ERP Demand Planning”
Well written and presented. Maybe I could offer some additional perspective as food for thought.
Most ERP systems have demand planning capability, and in addition there are many add-on forecasting and demand management tools available. However, the problem ERP systems and global corporations struggle with in today’s business environment is that demand is more volatile and unpredictable than ever before.
The traditional assumption that the past is a predictor of the future is outmoded and limited in applicability.
MRP calculations based around ever changing demand profiles simply create the classic bull-whip effect – too much of what’s not needed, and not enough of what is needed, when it’s needed. Which all leads to expedites and increased working capital costs.
Then factor in marketplace competition and product variability – if your product is not available where and when it’s needed, there will most likely be another alternative for your consumers to choose.
The only effective way of managing demand in these market conditions is by utilising Demand Driven Planning (DDP) techniques, with Demand Driven MRP (DDMRP) calculations. DDP software programs are cloud based SAAS add-ons that easily interface to the existing ERP system.
Companies who have embraced Demand Driven Planning are realising unprecedented benefits and cost savings, mainly through reduced inventory and working capital costs, significantly compressed lead times through the supply chain, greatly improved return on capital employed, and most importantly, hugely improved customer service and market responsiveness.
Which is where traditional ERP demand planning in its standard form has such difficulty in coping. That is not to say that ERP demand planning (with inbuilt MRP / DRP functionality) is obsolete and should be cast away – it is very necessary and still has a big role to play. It just needs help from DDP to make it lean and responsive to volatile demand.
I think ERP providers (like Epicor) can gain leverage in the marketplace by offering a DDP add-on.
For those interested I can provide more information about Demand Driven Planning (incorporating DDMRP & DDDRP), and DDP software options.