Estimating future demand forecast accuracy is one of the most fundamentally valuable, but frustratingly difficult, challenges in supply chain optimization. Any discussion of this subject will invariably note that forecasts are always wrong, but absolutely essential to planning business effectively. Demand forecasting software provides the crucial forward-looking picture that shapes how a company will deploy its supply chain to take maximum advantage of customer opportunity. “Demand planning” is the effort to increase forecast accuracy and customer service levels through better perceiving, predicting, and shaping the full range of factors that determine how well your product portfolio satisfies market needs.

No other aspect of supply chain optimization has greater impact on business profitability. Providing the best “one number” forecast requires capturing demand close to its source and accurately predicting actual demand with enough lead time and confidence to ensure maximum sales and operations performance at minimum cost. This paper outlines four key elements that support effective demand planning and establish fundamental parameters for higher service levels and lower inventory cost. These are the “pillars” on which competitive advantage and profitability are built:
- Forecast modeling
- Demand aggregation (and disaggregation)
- Management by exception
- Collaboration between internal and external supply chain stakeholders