skip to Main Content

Demand Planning vs. Supply Planning: Balance is the Key to Success

Supply Chain Planning

Organizations that manage a supply chain have a number of priorities that need to be continually balanced: meeting financial goals, completing customer orders on time and in full, and keeping facilities at optimal productivity levels, to name just a few. Achieving balance across these often-competing priorities requires demand planning to be integrated with supply planning. Sales and operations planning (S&OP) is one such process that can help align supply with demand because the outcome of the S&OP process is a consensus-based operating plan that unifies a company’s ability to create supply against the expected demand of their products.

Overview of Sales and Operations Planning

The designation “S&OP” itself implies that supply and demand planning are connected. Demand planners work with marketing and sales to forecast future sales and then with operations to generate the supply plan. Through the S&OP process discrepancies between the demand and supply plans are readily identified and methods to bring supply in balance with demand can be explored by the cross-functional S&OP team.

Before discussing how organizations can benefit from integrating demand planning and supply planning, it’s important to understand what each function contributes to a business.

Demand Planning

Without a proper understanding of demand, businesses can fall short in facilitating client orders and maintaining a steady workflow. Demand planners use historical sales data, along with awareness of upcoming product launches, promotions, and other marketing initiatives to anticipate future demand.

Supply Planning

During the supply planning stage of the S&OP process, supply planners interpret their organization’s demand forecast and create a roadmap for meeting that demand. Supply planners work closely with members of logistics, finance, operations, and manufacturing teams to gather accurate data.

The Value of Unconstrained and Constrained Planning

When performing demand and supply planning, it can be valuable to first consider an “unconstrained forecast.” The unconstrained forecast is based off the true demand potential that exists when running your forecast with no consideration given to constraints that may exist, such as capacity, materials, cash flow, etc. Conversely, the constrained forecast is a forecast constrained by the operations side of the business such as capacity, materials, cash flow, etc.

While it may not be realistic to fulfill the unconstrained forecast, understanding it gives a company the opportunity to explore the possibilities (i.e., what is the upside of investing resources needed to meet the unconstrained forecast).

After considering the upside that might result from meeting the unconstrained forecast, it is then important to evaluate the forecast from a constrained perspective. For it is the constrained view that will translate into an actionable, realistic operating plan. Typical constraints include, but are not limited to the following:

  • Minimum and maximum batch sizes
  • Admissible backorder numbers
  • Accessibility of specialized skills in the manufacturing process
  • Ability to pay staff overtime when production extends past traditional working days and hours
  • Feasibility of finding additional facilities for increased production
  • Storage capacities
  • Safety regulations, as administered by OSHA and the state
  • Time-based limitations on production


By anticipating and properly planning for these constraints, a company will be in a better position to meet customer service goals while minimizing cost.

The Advantage of Supply Chain Planning Software

Adopting supply chain planning software can facilitate an organization’s coordination of demand and supply planning, ensuring all contributors can access the same data through a single efficient, accessible platform.

Compared to manual planning methods, supply chain planning software provides the ability to analyze larger sets of data which can lead to more accurate forecasts. With purpose-built software, it is also more likely to detect trends and patterns in the data. Software also decreases the amount of time spent compiling and reconciling spreadsheets and avoids creating conflicting demand and supply plans. Instead, the software can generate a supply plan to match the organization’s demand plan swiftly and systematically.

To seamlessly integrate your organization’s demand planning and supply planning take a look at DemandCaster’s supply chain planning suite.

Related Articles

Supply Chain Planning to the Rescue – Cash Flow Management During COVID-19

During the best of times, managing cash flow can be challenging. But during long-term disruptions such as COVID-19, cash flow management can become an existential exercise. As companies look to assess the damage from the pandemic, in order to define [...]

5 Keys to Managing Supply Chain Planning in Uncertain Times

With the world having been plunged into uncertainty during the COVID-19 pandemic, a critical issue for business managers is stabilizing their supply chain to a consistent flow of components and materials. One July report by the Institute for Supply Management [...]

Beating Disruption with Digital Supply Chains

In the past, companies relied on the shared knowledge of a handful of people within an organization - and sometimes just one person - to plan and manage supply chain requirements. Supply Chain Management (SCM) consisted of phone calls, desk [...]

A Comprehensive Guide to Predictive Inventory Planning and Management

Inventory management remains an important operational feature that determines the successes and failures of enterprises especially in the manufacturing and retail industries. For inventory management, the challenges for most enterprises are similar at a basic level. The mom and pop [...]

Advanced Planning Challenges in Brownfield Facilities

The manufacturing industry relies on its legacy systems and equipment to get work done. This has been the way for decades. A report on the state of the manufacturing industry states that only 26% of manufacturing plants believe implementing new [...]

Best Practices for Resource Capacity Planning for Small and Medium Businesses

Manufacturing can be challenging in the best of conditions.  But for small and medium-sized businesses (SMBs) striving to remain competitive with large companies, their smaller size and reach mean that planning is even more crucial.   Small and medium-sized businesses often [...]

6 Questions that will Improve Your Capacity Planning Strategy

Capacity planning has always been a core strategic process in the manufacturing industries' quest to meet the demand of customers in a timely and efficient manner. Having accurate insight into your plant’s production capacity within specific durations of time while [...]

6 Tips to Improve Inventory Management through Automation

For companies with outdated or manual inventory management systems, lack of certainty about the accuracy of inventory levels can make managers and decision-makers apprehensive during busy times.  If calculations and inventory management practices are off, companies may find themselves with [...]

Strategies for Optimizing Customer Service Levels

  While every business works diligently to improve efficiency and operational excellence, at the end of the day it’s the customer who determines a company’s success.  And companies are looking for new ways to optimize customer service levels to improve [...]

The Method in the Madness – Choosing the Best Demand Planning Method

Aligning demand with supply is a critical function for any company.  And it’s one with a lot of moving parts.  The right demand plan must have a balance of inputs from all areas of the company to create forecasts that [...]
Subscribe to our Blog
Back To Top