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Optimal Demand Planning for Warehouses

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Demand Planning for Warehouses - Warehouse Employee planning
Steve Thompson
Steve Thompson
October 22, 2021

How far ahead is your demand planning for warehouses?

Supply and demand are not always predictable, but you can still aim for efficiency in your demand forecasting. Ordering the right amount of raw materials or products and accounting for supply chain deficiencies are essential for warehouse optimization. It's crucial to invest in the right software that gives you tools to predict future demand.

Maintaining Inventory Accuracy

People doing inventory in a warehouse

Some of the main reasons for warehouse inaccuracies include lack of modern warehouse management software, inefficient inventory allocation, poor layout, and lack of controlled visibility. Once you resolve these problems, you can speed up productivity.

Digital real-time communication is also crucial for inventory accuracy. An organized warehouse with the right software is a major key for how to maintain inventory accuracy.

Controlling visibility with video cameras is ideal because you can zoom in when you need closer views on product details. Visual displays help speed up locating products in real-time and checking expiration dates.

Another method for improving inventory accuracy and allocation is first-in-first-out (FIFO). This method cuts wasted products, space, and costs. You'll avoid hanging on to products past their expiration dates, which nullifies sales.

Reducing Negative Impacts on Inventory

Warehouse inventory can face negative impacts from a variety of challenges such as labor shortages, supply chain shortages, and fulfillment errors. You must devise a strategy with your software tools to track these issues continuously in real-time. The more you stay updated on real-time internal and external logistics, the stronger your operation will be.

Fulfillment errors can occur for a number of reasons such as:

  1. Poor communication between the warehouse and sales team
  2. Disorganized inventory management
  3. Pricing issues such as the customer believes they were overcharged
  4. Mix-ups in the shipping process
  5. The product takes longer to ship than the customer expects

Your warehouse workers should be connected with your warehouse management system using mobile devices so they can locate any product quickly. Analysts need to be certain that the data on the screen matches the physical inventory. From there demand planning for your warehouse will be based on accurate counts.

Understanding the Purpose of Demand Planning

It's important to be clear on how a demand forecast differs from either a supply plan or a demand plan. A demand forecast begins with analyzing historical and current sales data to form a demand forecast model. A supply plan is used by manufacturers and warehouses to gauge the number of units that should be produced based on demand.

A demand plan, by contrast, combines data on demand forecasts with supply plans to shape an integrated model. It connects demand highs and lows with various factors such as seasons and promotions.

Demand Planning Process

Balance between Supply and Demand

The planning process for warehouse forecasting involves analysis of sales data, order fulfillment, and data collected from the purchase order. An important part of resource planning is to study the factors that affect demand. A shortage of raw materials such as silicon, for example, can cause a demand for new computers to escalate.

Various other factors figure into demand, such as the degree to which current trends are driven by media. Television has traditionally been the catalyst for stimulating massive demand, but now the internet can be even more effective for moving products. You must meet consumer demand now with digital tracking tools to be competitive.

Comparing historical sales with recent sales data is essential for arriving at reasonable estimates on future inventory counts. You should also learn from other suppliers how they view the demand for certain products.

How an Optimized Layout Helps Demand Planning

The layout of your warehouse is not just about aesthetics. It should be set up so that products are easy to move in or out and place in appropriate locations. Removing unnecessary obstructions makes warehouse activity easier.

A crucial factor for your layout should be the separation between outbound shipments and inbound receipts. It will help avoid reshipping orders by mistake or mixing up inflows with outflows. You should also set aside space for dealing with obsolete or broken items that don't get in the way of routine logistics.

Refining Supply Chain Planning

Manufacturers that own warehouses can improve efficiency through diligent supply chain planning. Some newer companies are set up to create products on-demand as orders come in. Traditional manufactures rely on an older method of producing x number of units to meet projected consumer demand.

Regardless of how many units are produced at a time, manufacturers and retailers must avoid the bullwhip effect. This situation involves demand distortion within the supply chain due to differences in orders that aren't in sync with sales. A retailer might order more units than they need, which might distort a wholesaler's view of demand.

These imbalances can arise for numerous reasons including:

  • Suppliers rounding orders up or down
  • Forecasting updates by supply chain members
  • Price fluctuations such as discounting
  • Manufacturers or wholesalers misinterpret when a retailer increases order size

To avoid the bullwhip effect, suppliers need to work together at sharing real-time information. They must use their software tools to identify what's causing the imbalance. Fine-tuning supply chain management forecasting while tightening lead time helps result in more efficient inventory management.

Mastering the Art of Anticipating Demand

Man with a handheld telescope

A skillful logistics analyst can anticipate market demand by combining data with an educated professional opinion on upcoming demand. It helps to have a broad understanding of economic cycles and knowledge on what affects consumer price action. For an even sharper competitive edge, you should invest in machine learning software.

Machine learning software is a subset of AI technology that scans massive amounts of data to generate reports and system solutions at lightning speed. Most modern warehouses use this technology to rapidly analyze patterns in both supply and demand. Many times these patterns are overlooked by competitors that lack new technology.

The payoff for investing in demand planning technology is cost efficiency and an accelerated cash conversion cycle (CCC). That's the time between when you purchase and sell inventory. Using machine learning software can further help identify how to cut production costs to maximize profits.


Demand planning for warehouses gives you clear ideas on how many units of each product you can expect to sell in the future. It helps you evaluate and account for factors that can increase or decrease sales so you won't have to worry about overstocking with the right supply chain management strategies and warehouse management software. If you’re looking for pallet builders near you to maximize your warehouse efficiency, contact the pros at Pallet Market.