These are core components that make up demand:
Bullwhip effect is a common enemy of demand planners. Variability of demand, a moving target, along the supply chain magnifies in each point of the network due to the unpredictability of some variations that reasons cannot always be determined. Ways shall be identified to counteract those effects, e.g. by altering the supply chain infrastructure.
Although "all forecasts are wrong", forecasting demand is necessary to manage the supply by combining the intelligent estimation (through a usage of some helping tools) and quantitative analysis.
Relying on supplying partner in a mutual collaboration is often considered as a best way in improving the demand planning and reducing uncertainties. Vendor-managed inventory (VMI) is an example of such collaboration to enhance the demand planning performance to the customers.
Ways to minimize surplus and excess stock have to be continually sought unless it will add unnecessary fat to the inventory.
In contrary, shortage may not be allowable for items that are critical to the operations or if service level is one of your KPI item to maintain at a certain percentage we set. The challenge of every inventory managers and demand planners.
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