You’re gearing up for Black Friday peak. You’ve crunched numbers, reviewed past sales, and predicted exactly how much stock you’ll need.
But just three days in, your best-sellers are wiped out, and you're struggling to get your supplier on the phone to place another purchase order.
What went wrong?
Chances are, there was a gap between your demand planning and supply planning. While demand planning helps you forecast what customers will want, supply planning ensures you have the right inventory in place to meet that demand. And they both form an important part of overall planning and forecasting.
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Both are important and when they’re not aligned, things can get messy fast. In this blog, we’ll break down the key differences between demand and supply planning and how they work together to keep your Shopify store running smoothly.
What is Demand Planning?
Demand planning is the process of predicting future customer demand for a product.
It typically involves analyzing historical sales data, market trends, and other influencing factors (like seasonality or promotions) to estimate how much of a product your customers are going to want so you can keep enough stock to fulfill their demand.
When done right, it helps you maintain balanced inventory levels, avoiding stockouts or sitting on a mountain of unsold inventory.
Components of Demand Planning
Demand planning isn’t a single step; it’s a blend of data, analysis, collaboration, and technology working together to predict customer demand accurately.
Here’s what makes up demand planning
1. Data collection and analysis
The first step in demand planning is gathering the right data (and lots of it). The starting point of most demand plans is collecting historical data (unless you’re launching a new product).
By combining this data with customer feedback and market research, you will be able to spot patterns and trends that help predict future demand.
Using demand planning tools like Prediko takes this a step further.
With just one click, the app will pull in all your inventory and sales data from Shopify, saving you the hassle of patching together different spreadsheets.
The better your data, the better your decisions.
2. Demand forecasting
Once you’ve gathered your data, the next step is forecasting. This involves using statistical models and specialized software like Prediko to predict future demand.
These tools crunch the numbers, factoring in past sales, seasonal trends, and growth patterns to generate accurate forecasts.
With this, you can confidently plan inventory levels, production schedules, and purchasing strategies. Prediko’s AI has been trained on 15 million SKUs across 25+ industries to identify patterns.
It automatically fetches your past sales, seasonality, and growth to forecast demand at SKU, product, category, and company levels.
3. Demand shaping
Forecasting tells you what demand might look like but what if you could influence it?
That’s where demand shaping comes in.
By adjusting prices, running promotions, or launching targeted marketing campaigns, you can actively steer customer demand to align with your inventory and production capacity.
This helps prevent stockouts and overstock situations.
4. Cross-collaboration
Successful demand planning doesn’t exist in a vacuum. It’s also about teamwork. Sales teams provide on-the-ground insights, like customer feedback or upcoming deals, while marketing shares plans for promotions or campaigns that could spike demand.
Let’s say, a new ad campaign is expected to double interest in a product.
Without that input, the forecast flops. Regular meetings or shared tools keep everyone aligned so that the plan reflects reality, not just assumptions.
Benefits of Effective Demand Planning
Here’s why smart demand planning pays off
1. Improved inventory management
One of the biggest wins from effective demand planning is stocking up accurately at the right time.
By accurately predicting customer demand, you can avoid the traps of overstocking (warehouses stuffed with unsold goods) and out-of-stock (empty shelves and lost sales).
This balance frees up storage space, reduces holding costs, and keeps cash flow healthy.
2. Higher customer satisfaction
Keeping your customers happy is what drives your business forward and accurate demand planning plays a big role in that.
When you can anticipate what your customers will need and when, you’re better prepared to meet demand without delays.
When that happens, your customers are satisfied, they come back, and word-of-mouth grows, improving your brand’s reputation.
3. Reduced costs
By forecasting demand accurately, companies can minimize excess inventory (reducing storage and spoilage costs) and avoid rush orders (which often come with premium shipping fees).
For instance, a manufacturer might order raw materials in bulk ahead of a predicted surge, getting better rates instead of rushing at the last minute.
Prediko helps manufacturers with full-funnel planning, covering both finished goods and raw materials. It helps track inventory, place production orders, and restock on time. It also lets you coordinate with suppliers directly in the app to avoid delays.
Plus, well-planned operations mean less waste and more efficient use of resources, savings that add straight into your profit.
4. Better decision-making and strategic planning
With a solid demand forecast in hand, you don’t just make smarter inventory choices today but also inform tomorrow’s decisions like new launches, expansion, pricing, budgeting, and staffing.
Let’s say a toy company predicts a big Christmas season, they can hire seasonal workers early to meet that demand with confidence, adding to their long-term success.
Learn more about planning your holiday inventory effectively in this detailed guide.
Now that we’ve covered demand planning, let’s shift our focus to supply planning.
What is Supply Planning?
Supply planning is the process of managing inventory, production, and purchasing so that you have the right products, in the right place, at the right time. Simply put, it turns forecasts into actionable steps by coordinating with suppliers, tracking lead times, and optimizing inventory levels to meet customer demand efficiently.
Components of Supply Planning
Supply planning is all about making sure everything’s ready to roll when demand kicks in. Important elements of supply planning include
1. Material requirement planning (MRP)
This involves calculating the materials and components needed to meet production demands. It helps you to have the right quantities of raw materials or parts at the right time, based on schedules and forecasts.
2. Production planning
This focuses on scheduling and organizing the manufacturing process. It determines what to produce, in what quantities, and when to schedule production runs, balancing demand with production capacity.
It also includes managing resources such as labor and machinery to manufacture products efficiently and on time.
3. Inventory management
This involves tracking inventory levels (raw materials, work-in-progress, and finished goods), managing stock replenishment, and optimizing inventory turnover.
The goal is to minimize excess while ensuring enough inventory to meet demand without delays. Done right, it helps in reducing carrying costs and stockouts.
💡See which apps make it to the list of the best inventory management Shopify apps.
4. Logistics and distribution
This covers the movement and delivery of goods, from coordinating transportation to managing warehouses, so that products reach customers or retailers efficiently.
Planning this improves customer satisfaction and reduces operational costs.
Benefits of Effective Supply Planning
Effective supply planning brings a range of benefits to your business, which are
1. Cost savings
By aligning supply with demand plan, brands cut unnecessary expenses across the board.
You avoid overstocking, which ties up cash (storage and insurance) and risks spoilage or loss of value. It also eliminates the need for costly last-minute solutions, like expedited shipping or overtime labor to fix shortages.
Fewer stockouts mean no lost sales or customer goodwill, while efficient procurement reduces administrative overhead.
Every dollar saved here increases your profitability.
2. Better supplier terms & coordination
Supply planning gives a clear picture of your inventory needs: volume, timing, and frequency, which strengthens your position at the bargaining table.
When you can commit to consistent, predictable orders, suppliers are more likely to offer discounts or favorable terms, as it reduces their uncertainty.
It also builds long-term trust, opening doors to perks like extended payment terms or exclusive access to limited stock.
3. Smoother supply chain operations
Smarter supply planning keeps the entire operation running like clockwork.
Production schedules align with material arrivals, so there’s no downtime or rushed rework. On-time order deliveries become the norm, not the exception, reducing complaints and returns.
It also enables quick pivots and risk mitigation, say, shifting resources when demand unexpectedly spikes, keeping operations adaptable. This eases pressure on staff, cuts chaos and idle time in the supply chain, and keeps everything flowing seamlessly.
Youri, Founder of Prediko, shares insights on building strong supplier relationships in a Limited Supply webinar. Watch it here.
Key Differences Between Demand and Supply Planning
Demand planning and supply planning are two sides of the same coin, but they serve different purposes in the supply chain. One answers “What do we need?” while the latter answers “How do we get it?”
To make it clear, here’s a breakdown of the key differences between demand planning and supply planning.
Demand Planner VS Supply Planner
A demand planner and a supply planner might sound like they do the same thing, but they actually manage different parts of the supply chain.
A demand planner is responsible for forecasting customer demand using historical sales data, market trends, seasonality, and external factors like promotions or competitor activity.
Their main goal is to predict how much of a product will be needed in the future so the company can avoid stockouts or overstocking. Demand planners work closely with sales, marketing, and finance teams to ensure forecasts correspond to the business goals.
A supply planner, on the other hand, takes that demand forecast and turns it into an actionable supply plan.
They manage supplier relationships, production schedules, lead times, and inventory levels so that you have the right amount of stock at the right time.
Supply planners work closely with demand planners, procurement, manufacturers, suppliers, logistics teams, and warehouse teams.
Challenges in Demand Planning (+Best Practices)
Here are the key challenges businesses face during demand planning, along with best practices to tackle them effectively.
Challenge 1: Inaccurate or incomplete data
Forecasts rely on historical sales, market trends, and customer behavior, but this data can be outdated, inconsistent, or missing.
For instance, if real-time sales data from a channel is missing, it can lead to inaccurate demand estimates, resulting in overstocking or stockouts.
How to address this
Manual data sync across channels is tedious and error-prone. Automate data sync from multiple sources –POS, online sales, subscriptions, and even warehouse inventory to keep your data clean for processing.
Use apps like Prediko that consolidate all your sales and inventory data in one place, whether you’re managing multiple stores, warehouses, bundles, or subscriptions.
Challenge 2: Demand volatility, seasonality, and trends
Keeping track of sudden shifts, like a viral product, seasonal peaks (especially if past patterns don’t hold) or emerging trends is tough.
Missing these can throw forecasts off leading to reactive adjustments that strain resources and timelines.
How to address this
- Keep tracking the percentage of plan achieved and adjust your forecasts to adapt to the new info
- Build flexibility into forecasts by setting safety stock levels for volatile items
- For seasonality, study multi-year historical data, monitor market signals (e.g., Google Trends, competitor moves), and use predictive analytics to spot patterns
- Incorporate external factors (e.g., inflation rates), industry reports, and risk assessments into planning
- Partner with suppliers for early warnings on supply chain disruptions
Prediko’s predictive AI (trained on millions of SKUs across various industries) fetches your historical sales data, seasonality, and growth patterns to forecast demand at the SKU, product, and category levels.
Its analytics highlight the percentage of plan achieved, the number of SKUs in excess, and more, so you can adapt accordingly.
Using Prediko, you can also set safety stock levels for products and SKUs to safeguard against stockouts and keep your inventory ready to meet demand.
Also read: How to establish safety stock for your Shopify store
Challenge 3: Poor collaboration across teams
Sales, marketing, and supply chain teams often work in silos. If marketing plans a big promotion but doesn’t tell demand planners, forecasts won’t reflect the spike. This can cause supply shortages or overproduction.
How to address this
Hold regular meetings with sales, marketing, and supply chain teams to share insights, like upcoming campaigns or customer feedback, and align goals.
Use collaborative platforms like Prediko to centralize different functions like purchasing, demand planning, raw material management, and more.
Challenge 4: Overreliance on tools or assumptions
Using tech for complex demand planning calculations is essential. However, automated forecasting software might not account for nuance like a one-time event driving sales.
On the other hand, planners might stick to gut feelings over data. These blind spots in forecasts lead to poor decisions.
How to address this
Balance technology and human insight. Use advanced tools that allow you to pair your experience with their capabilities. Prediko, for instance, lets you edit your forecasts based on your expertise, blending data-driven predictions with real-world context.
Also, check out the list of Top 12 demand planning software in the market today.
Challenges in Supply Planning ( +Best Practices )
Supply planning also comes with its own set of challenges and there are ways to address them.
These include
Challenge 1: Inaccurate demand forecasts
Supply planning depends on demand projections, but if those forecasts are off, due to poor data or unexpected shifts, supply gets messed up.
How to address this
- Regularly sync with demand teams to refine forecasts using real-time sales, customer insights, and market signals. Adjust plans based on current data rather than sticking to static predictions.
- Use AI-driven forecasting tools (e.g., Prediko) that analyze historical sales and trends to create forecasts, but let you review and modify outputs for accuracy.
Challenge 2: Inefficient supplier coordination or delays
Suppliers might miss deadlines due to production issues, poor communication, shipping delays, or raw material shortages. This can lead to stock issues and unfulfilled customer expectations.
How to address this
- Communicate regularly with suppliers. Set up regular check-ins and shared platforms with them to track progress and spot issues early. Define expectations via contracts or SLAs. Prediko lets you easily share POs using exports and in-app emails and communicate with your suppliers right from where you plan inventory.
- Diversify and work with multiple suppliers to spread risk and use performance metrics (e.g., on-time delivery rates) to prioritize reliable partners. Always have backup suppliers ready.
Challenge 3: Inventory imbalances
Inaccurate stock levels, whether due to misjudged forecasts or supplier delays, can leave you with too much or too little inventory. Surpluses drain cash and space; shortages cost you sales and customer trust.
How to address this
- Implement inventory control techniques like safety stock for volatile items and just-in-time ordering for stable ones, guided by real-time inventory tracking.
- Analyze stock turnover rates and demand shifts weekly or monthly to rebalance inventory, clearing slow movers with promotions if needed.
- Reliable communication and strong partnerships with suppliers can help you manage lead times, minimize delays, and respond quickly to unexpected changes.
How Demand Planning and Supply Planning Work Together
Demand planning and supply planning must work in harmony to ensure a business can meet customer needs efficiently and profitably.
While demand planning focuses on predicting what customers will want, supply planning makes sure the resources and processes are in place to deliver it.
Here’s how they collaborate
1. Supply chain execution
An accurate demand forecast is the foundation for supply planning. Once the data and external factors are analyzed, a demand plan is created that guides supply decisions.
For example, if demand planning predicts a 20% spike in holiday sales, supply planning ensures enough raw materials are sourced, warehouse space is secured ahead of time, and other resources are allocated.
Without an accurate forecast, supply planning could over- or under-prepare, leading to waste or shortages.
2. Manage stock levels
Demand planning identifies patterns and trends in customer demand. And supply planning adjusts the supply chain to match those fluctuations
If during demand planning, a drop in interest for a product is expected, supply planning would include scaling back orders to avoid excess stock.
Conversely, if a new product is expected to take off, supply planning ramps up procurement and logistics to meet the spike, ensuring no lost sales.
3. Data sharing and feedback loop
Demand planning and supply planning together create a continuous feedback loop wherein the former generates insights and the latter offers real-world data back to demand planning to help refine future forecasts.
For instance, if supply planning reports a supplier can’t deliver on time, demand planning adjusts forecasts to reflect realistic availability, while supply planning explores alternative vendors. Over time, this collaboration sharpens accuracy and responsiveness.
4. Risk management
Demand planning and supply planning team up to create resilience for your business. Demand planning anticipates risks like demand volatility or market disruptions (e.g., a competitor’s launch) that could throw off projections.
Supply planning builds contingencies (like safety stock or flexible supplier agreements) to handle those risks without affecting your operations.
Dive deeper and learn how to build supply chain resilience in this article.
Using Prediko for Both Demand Planning & Supply Planning
For better accuracy in managing your inventory, implementing both demand and supply planning tools is essential.
If you're a Shopify store owner, Prediko brings both demand and supply planning into one platform, eliminating the need to export data between tools or manually update spreadsheets.
Prediko’s AI, trained on millions of SKUs across industries, predicts demand by analyzing historical sales, seasonality, and growth trends and distributing your revenue target across the next 12 months.
Prediko’s Buying Table helps with supply planning by sitting right next to the planning interface. It provides live purchase order recommendations based on your stock cover levels, days of stock, lead times, sell-through rates, and forecasted plan. With just one click, you can create POs directly from Prediko so that you stay stocked without over-ordering.
The software also generates replenishment alerts and sends daily and weekly inventory reports straight to your inbox. This keeps you informed about products or SKUs that are at risk or out of stock, all presented in a clean Airtable-style interface for easy analysis.
Experience integrated demand planning and supply planning with Prediko’s free 14-day trial.
FAQs
What is the difference between S&OP and demand planning?
Demand planning focuses on forecasting future demand, while Sales & Operations Planning (S&OP) aligns demand forecasts with supply, production, and financial goals.
What is a supply and demand planner?
A demand planner focuses on forecasting customer demand by analyzing historical sales, market trends, and seasonality. A supply planner, on the other hand, takes those demand forecasts and ensures the right amount of inventory is sourced, produced, and distributed.
What is the difference between production planning and demand planning?
Demand planning predicts future customer demand, while production planning determines how and when products will be manufactured to meet that demand.
What is the difference between MRP and demand planning?
Material Requirements Planning (MRP) focuses on ensuring raw materials are available for production, while demand planning forecasts customer demand.
What are the 3 major activities of demand planning?
The key activities are data collection and analysis, demand forecasting, and collaboration across teams to align supply with projected demand.
