Sales and Operations Planning (S&OP) is a structured, cross-functional business process that aligns all areas of an organization around a unified set of assumptions to drive coordinated decision-making. The goal of S&OP is to ensure that business plans and objectives are balanced and that financial and operational plans are synchronized. It serves as the critical integration point between strategic planning and daily execution, enabling companies to translate high-level business objectives into actionable plans.

At its core, a mature S&OP is not just a supply chain or operations process. It is a business-wide planning framework that brings together sales, marketing, finance, operations, product management, and supply chain to work collaboratively. The result is a comprehensive plan everyone supports and works toward, reducing misalignment, improving responsiveness, and increasing overall business performance.

The process typically operates on a monthly cadence, with inputs from various departments converging into a final executive review meeting where trade-offs are discussed, decisions are made, and a single, unified plan is committed to.

The Value of S&OP

Implementing and executing an effective S&OP process provides tangible value across the organization. At a high level, S&OP delivers:

• Improved forecast accuracy and demand visibility: S&OP allows companies to move from reactive to proactive planning, reducing surprises and enabling better preparedness for market changes.
• Balanced supply and demand: With cross-functional collaboration, companies can more efficiently manage supply constraints, optimize inventory levels, and meet customer service goals.
• Financial alignment: S&OP ensures that operational plans are financially viable and support the broader goals of the business. It connects demand and supply plans to financial projections.
• Increased agility: The ability to run scenarios and analyze the impact of decisions across the business improves agility in the face of disruptions or demand shifts.
• Enhanced collaboration: S&OP builds a culture of accountability and transparency. It fosters communication across silos and ensures that all stakeholders work from the same assumptions.
• Executive-level visibility: With clear insights into upcoming challenges and opportunities, executives can make informed decisions with confidence.

Organizations with mature S&OP processes often see improvements in service levels, inventory turns, working capital, and revenue growth. But the actual value lies in the enhanced decision-making capabilities and improved alignment across the business.

How to Build a Sales and Operations Plan

Developing a robust sale and operations plan requires a clear structure, defined roles and responsibilities, and a commitment to consistent execution. While tools and technology play a role, the foundation of effective S&OP lies in process discipline and cross-functional collaboration.

Here are key building blocks to consider:

• Leadership commitment: Executive sponsorship is essential. S&OP must be seen as a strategic business process, not just a supply chain activity.
• Defined ownership and governance: Each step of the process should have clear ownership, with defined roles for demand planning, supply planning, finance, product management, and executive teams.
• Calendar and cadence: A standard monthly cycle should be established, with defined inputs, outputs, and meetings for each phase. Concurrent weekly S&OP meetings help manage near-term deviations.
• Unconstrained and unbiased planning: The demand plan should be developed independently of constraints or biases, providing a true reflection of expected demand. Only then can supply plans be adjusted accordingly.
• Data and metrics: Reliable data is the backbone of S&OP. Forecast accuracy, bias, inventory health, and capacity utilization are some of the key metrics that drive accountability and improvement.
• Technology and tools: While not a prerequisite, modern planning tools can enhance collaboration, scenario planning, and automation. However, these tools must support—not replace—a sound process.
• Culture and change management: S&OP is as much about people as it is about process. Building trust, encouraging open dialogue, and reinforcing accountability are crucial for success.

Key Steps in S&OP

A typical S&OP process includes several structured review steps culminating in an executive decision-making forum. Here is an overview of each phase:

Product Review

• Purpose: Align the product and portfolio roadmap with business strategy.
• Activities: Review new product introductions, end-of-life plans, promotions, and phase-outs. Evaluate the impact of changes on demand and supply.
•  Participants: Product management, marketing, R&D, operations, and finance.

Demand Review

• Purpose: Develop an unconstrained, consensus demand plan.
• Activities: Analyze historical performance, market trends, customer input, and promotional plans. Identify risks and opportunities.
• Participants: Demand planning, sales, marketing, and finance.

Supply and Resource Review

• Purpose: Determine how to meet the demand plan with available resources.
• Activities: Evaluate capacity, inventory, procurement, logistics, and supplier capabilities. Highlight constraints and propose scenarios.
• Participants: Supply planning, manufacturing, procurement, logistics, and finance.

Pre-S&OP/Reconciliation Review

• Purpose: Identify gaps between demand and supply, align on scenarios, and prepare for executive discussion.
• Activities: Review financial implications, resolve issues, and recommend decisions.
• Participants: Cross-functional team leads, finance, and planning leadership.

Executive S&OP Review

• Purpose: Make final decisions, approve the consensus plan, and provide strategic direction.
• Activities: Review scenarios, validate financial impact, approve trade-offs, and document decisions.
• Participants: Executive leadership, heads of major functions, and finance.

Concurrent Process: Sales & Operations Execution (S&OE)

While S&OP focuses on the mid- to long-term horizon (typically 3 to 24 months), S&OE manages near-term execution (0 to 13 weeks). This weekly process addresses short-term deviations from plan and ensures agility in responding to real-time changes. Key focus areas include order fulfillment, short-term supply imbalances, and demand shifts. S&OE connects strategy to execution, ensuring that decisions made in S&OP are implemented effectively.

Sales and Operations Planning: The Final Word

In today’s complex and volatile business environment, Sales and Operations Planning is more than just a process—it’s a mindset and an essential capability. Companies that embrace S&OP gain the ability to navigate uncertainty, align cross-functional teams, and drive smarter, faster decisions.

The future of S&OP is one of greater integration, intelligent automation, and real-time visibility. But, at its heart, the success of S&OP will always depend on three things: collaboration, transparency, and consensus.

Organizations that invest in building a strong S&OP process—supported by leadership, informed by data, and aligned with strategic goals—will be better positioned to thrive. They will not only deliver superior performance but also foster a culture of shared accountability and continuous improvement.

In short, Sales and Operations Planning is the bridge that connects strategic intent to operational execution. Done right, it becomes a sustainable competitive advantage.

In today’s disruptive global marketplace, more and more companies are laser focused on supply and demand planning and how to get it right.

This guide explains the two disciplines, their differences, and how they work together. Use the information to build a solid foundation for controlling your inventory in these challenging times.

What is Demand Planning?

Demand planning uses analytics, data, insights, and human experience to make predictions and respond to various business needs. It leverages demand forecasts—not as an end in themselves—but as a tool to highlight opportunities and risks, establish business goals, and support proactive planning across functions.

There are two types of demand planning — unconstrained and constrained. With unconstrained demand forecasting, the planner focuses exclusively on raw demand potential, not factoring in possible constraints like capacity and cash flow. This method determines how much you could sell if supply were not an issue. Constrained forecasting, however, considers these factors, creating a more realistic picture.

Businesses should leverage both unconstrained and constrained demand planning to deliver the most value to consumers while keeping costs down.

Essential Considerations in Demand Planning

Businesses must focus on these four areas of demand planning to succeed during this global unrest.

• Historic product sales: What you’ve sold in the past may indicate what you can expect to sell in the future, although that may not always be true. What’s critical to getting things right is to select the correct historical periods and market and economic conditions.
• Internal trends: Using historical data, identify sales trends for one product or group of products.
• External trends: Some factors that may impact a company’s ability to efficiently meet its customers’ needs. These include competition, sociocultural issues, legal factors, technological changes, the economy, and the political environment. (The last two are particularly critical today.)
• Promotional events: When companies run sales, events, or promotions, sales often increase. Demand planning must account for this as well.

Accurately forecasting demand is complex, but businesses must master it during challenging times like today.

What is Supply Planning?

As we covered, demand planning is the process of predicting consumer demand.

Supply planning, by contrast, determines how a business will fulfill demand within the organization’s financial and service benchmarks. It must factor in things like inventory production and logistics. Specifically, it must consider factors like on-hand inventory quantities, open and planned customer orders, minimum order levels, lead times, production leveling, safety stocks, and projected demand.

The five key functions of supply planning are:

1. Business operations is where demand forecasting comes in. Once you’ve calculated the demand, you are able to decide how much inventory you need. At this step, you should know how much product must be ordered and produced.
2. Acquisition involves purchasing materials or final products. Buying supplies is a critical part of having adequate inventory on hand. It requires partnering closely with your suppliers — and their suppliers — especially during uncertain times.
3. Resource management is where companies ensure adequate resources are available and distributed to the correct locations.
4. Workflow of information keeps supply chain management on track by using standardized systems across all departments preventing disconnects.
5. Transportation and logistics pull together all the components of planning, buying, manufacturing, storage, and transportation to ensure an adequate supply of items reaches the consumer.

Practicing supply planning effectively can help keep companies successful during challenging times.

Supply Planning Versus Demand Planning

Demand planning and supply planning aren’t two completely different things. They are actually two halves of a whole.

Demand planning aims to predict how much of a product you need to have available to meet consumer demand. Supply planning determines how to meet that demand within your company’s cost and service rules.

Demand impacts supply, and supply is dependent on demand.

You cannot meet demand without sufficient supply. Similarly, you can’t ensure adequate supply without clearly understanding demand, especially in changing times. You need both to keep your business healthy.

The key difference between the two types of planning are the characteristics of the data that fuels them.

Much of the information used for supply planning is internal or comes from sources connected to the company. It involves analyzing production capacity, time constraints, supply costs, delivery times, storage requirements, and other factors. Because you have relatively easy access to — and control over — supply chain data, it is u easier to master the supply side of the supply and demand equation.

Businesses typically have less control over demand data. While some of it is internal, like historical and seasonal sales records, much is external, like economic trends. This makes demand planning less dependable and more challenging than supply planning.

In short, because supply planning uses more defined and owned data points, it is typically more concrete and reliable. It provides practical direction on how you’ll meet consumer needs. By contrast, demand planning uses less definite and owned information. While certain algorithms and data sources are more accurate than others, forecasting always involves some level of prediction. Supply planning and its practical calculations using more reliably sourced data are typically less volatile.

Another way to view supply planning versus demand planning is to compare their ultimate goals. Demand planning delivers predictions that impact supply planning and other business decisions, while supply planning pays off with inventory optimization.

• Predictions: Demand planning considers a wide array of factors to develop as accurate forecasts as possible. Demand predictions inform supply planning and support other business decisions, such as when to offer promotions or find new vendors.
• Optimization: Supply planning determines how you’ll meet projected demand within your organization’s operational constraints and business objectives. It considers available resources and other factors to develop a plan prioritizing efficiency, cost savings, and speed. The supply plan must align fully with company goals and allow it to take action to achieve them. For instance, if an organization wants to reduce costs for a project, a supply plan might recommend buying materials with a slower fulfillment timeframe. This approach wouldn’t be appropriate for a business driven by tight deadlines.

A balanced approach to demand and supply forecasting is essential for ensuring appropriate stock levels without storing extra inventory, but striking that balance looks different for every business. High-quality data is a key component of both planning types, making analytics and robust supply chain management software and systems especially valuable.

Supply Versus Demand Planning: The Final Word

Supply planning and demand planning aren’t competing factors within a company. Instead, they should be viewed as complementary functions that allow businesses to operate more efficiently and effectively. This is especially critical when operating in dynamic and challenging times like today.

Do you have questions about demand planning? This guide explains everything you need to know about this complex topic in a simple and understandable way.

What is Demand Planning?

Demand planning is the process of using analytics, data, insights, and experience to make predictions and respond to various business needs. It leverages demand forecasts—not as an end in themselves—but as a tool to highlight opportunities and risks, establish business goals, and support proactive planning across functions.

While demand planning often reports into the supply chain, it is not solely a supply chain function. It is a cross-functional discipline that integrates insights from sales, marketing, finance, and operations to create a consensus plan—a unified view of what is most likely to happen in the market.

Demand planning combines historical sales analysis, market intelligence, consumer behavior trends, and business knowledge to guide actions across the organization. It enables companies to anticipate demand shifts, align resources accordingly, and avoid stockouts and excess inventory, especially in an environment where customer expectations and market conditions constantly evolve.

At its core, demand planning drives better business performance by ensuring that decisions are based on relevant, timely, and collaborative inputs, not guesswork or isolated projections.

Bottom line: An accurate demand forecast provides the information your operations and sales teams need to plan how much product to buy or manufacture to meet projected demand as efficiently as possible with limited waste.

What is the Difference between Demand Planning and Demand Forecasting?

Demand forecasting and demand planning are closely connected but serve different purposes:

• Demand forecasting is the analytical process of using data, statistical models, and judgment to predict future demand. It’s a probability-based estimate of what might happen and forms the foundation for planning decisions?
• Demand planning takes the forecast further by integrating it into the business strategy, aligning stakeholders around a shared set of expectations, and determining the actions needed to respond to that demand.

What Purpose Does Demand Planning Serve?

Demand planning aims to create a realistic and actionable view of future demand so the organization can align supply, resources, and investments accordingly. It addresses critical issues including:

• Strategic planning and assessing risk (long-term planning and S&OP/IBP)
• Finance and accounting (budgets and cost controls)
• Marketing (consumer behavior, life cycle management, pricing)
• Operations and supply chain (resource planning, production, logistics, inventory)

Why Is Demand Planning Important?

In a world of increasing uncertainty, demand planning helps companies stay ahead. Done well, it enables organizations to:

• Improve service levels and customer satisfaction
• Minimize inventory carrying costs and waste
• Respond quickly to supply chain disruptions or market shifts
• Enhance collaboration between departments
• Increase profitability and operational efficiency

Demand planning is not a one-time task but an ongoing, iterative process that requires the correct data, tools, and cross-functional collaboration. It must also be flexible enough to adapt to volatility, whether driven by global events, consumer trends, or economic shifts.

Poor demand planning leads to the outcomes businesses aim to avoid: lost sales, excess inventory, wasted capital, and disconnected teams working from different assumptions. A well-executed demand planning process, on the other hand, builds organizational alignment, reduces bias, and leads to better business outcomes.

Why is it Critical for Businesses to Practice Demand Planning?

Demand planning is not just a supply chain function; it’s a core business process that drives strategic alignment, financial performance, and customer satisfaction. Based on IBF research from 34 organizations across different industries, companies that invest in structured, data-driven demand planning realize tangible benefits across key areas of the business.

1. Improve service and protect revenue: A strong demand planning process helps businesses meet customer needs with greater reliability, ensuring on-time and in-full (OTIF) performance, even in the face of market volatility or promotional spikes. The result? Improved customer satisfaction, stronger brand loyalty, and higher top-line revenue.

Fact: A 15-point improvement in forecast accuracy has been shown to drive on to two percent in top-line sales growth and improve OTIF performance, meaning fewer stockouts and more happy customers.

Demand planning ensures your business doesn’t miss out on sales because of poor availability. It provides the early visibility needed to make smarter inventory and production decisions, keeping your shelves stocked and your customers returning.

2. Increase operational efficiency and reduce cost: Demand planning enables organizations to run more efficiently by minimizing waste, improving resource utilization, and allowing smarter scheduling of production, logistics, and labor. It transforms decision-making from reactive to proactive—letting teams plan ahead rather than scramble in response.

Fact: A 15-point improvement in forecast accuracy can deliver a 2.3 percent or more increase in pre-tax net profit, driven by better operational alignment and cost control.

By aligning cross-functional teams around a consensus forecast, organizations reduce duplication of effort, optimize capacity, and ensure the right resources are available at the right time—leading to smoother operations and lower costs.

3. Manage assets and free up cash: Effective demand planning significantly improves companies’ inventory and working capital management. With clearer insight into what’s actually needed—and when—businesses can reduce excess inventory, lower carrying costs, and avoid the pitfalls of overproduction or fire-sale markdowns.

Fact: For every 15-point improvement in forecast accuracy, companies can realize a 12 percent reduction in inventory, freeing up valuable cash and minimizing waste.

Demand planning ensures businesses are not over-invested in supply, storage, staffing, or space. It helps unlock capital tied up in inventory and directs it toward more strategic, value-added investments.

Demand planning is no longer optional. It’s a strategic necessity. Organizations that invest in robust demand planning processes not only gain greater visibility and control but also position themselves to thrive in a constantly evolving marketplace. With the proper training, structure, and leadership, demand planning becomes a competitive advantage that enables more resilient, data-driven organizations.

Where Does Demand Planning Fit Within an Organization?

Demand planning is a strategic, cross-functional process that touches nearly every part of the organization—from supply chain and operations to sales, marketing, and finance. While its reporting structure can vary, what matters most is how the function is structured, supported, and empowered, not simply where it reports.

Based on IBF research and industry benchmarks:

• 48 percent of demand planning functions report into supply chain or operations
• 23 percent report into the commercial side of the business, such as sales or marketing
• 8 percent report into finance
• 10 percent operate as an independent function or report directly to a business unit owner
• The remaining 11 percent follow other models depending on organizational design.

These variations reflect the flexibility of demand planning—it can reside within different departments, depending on the company’s structure, maturity, and strategic priorities.

But here’s the key: regardless of the reporting line, demand planning must operate as a cross-functional, collaborative, and unbiased process. Its success depends on its ability to engage multiple stakeholders, reconcile competing priorities, and drive consensus to produce a unified, realistic view of future demand.

The Complexities of Demand Planning

Finding and maintaining the perfect balance between sufficiency and surplus can prove especially tricky. It isn’t a once-and-done task. Economic conditions change, and competitive environments constantly evolve.

To address this, demand planning typically requires using demand forecasting to predict future demand trends. This has added benefits, most importantly, heightened company efficiency and increased customer satisfaction.

What are the Key Components of Demand Planning?

Here are the critical parts of demand planning:

Product portfolio management

Effective demand management requires a clear understanding of product lifecycles, from launch to phase-out. Product portfolio management supports this by tracking each product’s stage and showing how changes in demand can impact related items. It also plays a key role in planning new product introductions, helping teams anticipate demand, allocate resources, and support successful launches. With strong portfolio management, companies can better manage transitions, reduce risk, and respond more effectively to market changes.

Statistical forecasting

Statistical forecasting is based on the concept that past history best predicts future performance. It uses complex algorithms to analyze historical data to develop demand forecasts. This exacting process demands accurate data, including eliminating outliers, exclusions, and baseless or inaccurate assumptions.

Sales forecast and overrides

As a process champion, the demand planner plays a critical role in driving consistency, structure, and accountability across the forecasting process. One of the key responsibilities is managing sales inputs and overrides—ensuring that adjustments to the statistical forecast are based on valid insights rather than bias. This involves working closely with sales teams to understand market intelligence, promotions, and customer expectations while also challenging assumptions when needed. The goal is to balance collaboration with discipline, ensuring that overrides improve forecast accuracy and align with broader business objectives.

Trade promotion management

In today’s highly competitive environment, it can be challenging to spark the interest of prospective customers. That’s why sales and other promotions are becoming increasingly common. They often result in increased consumer demand. Trade promotion management helps ensure that these types of programs are properly executed, that there is adequate product supply, and that they deliver all expected benefits to a company.

Demand Planning Methods

Quantitative forecasting methods are the foundation of most forecasting processes, with approximately 74 percent of companies relying on historical data to project future demand. Standard demand forecasting methods are:

• Time series models, used by nearly half of organizations (48 percent), are the most common approach and focus on identifying patterns, trends, and seasonality in historical data.
• Cause-and-effect models, used by 17 percent of companies, link external or internal variables—like price changes or promotions—to shifts in demand behavior.
• Machine learning and AI are emerging tools in forecasting. Currently, about six percent of organizations use them, and as adoption grows, they offer the potential for more adaptive and automated insights.
• Judgmental forecasting, reported by 17 percent of companies, is a qualitative method incorporating expert knowledge, market intelligence, and human insight when data is limited or context is needed.

What is Required to Do Demand Planning Effectively?

Effective demand planning is more than just generating a forecast. It’s about creating a reliable, unbiased view of future demand that drives smarter decisions across the organization. Done right, it improves service levels, optimizes inventory, enhances collaboration, and ultimately boosts profitability. However, to achieve these outcomes, companies must establish the proper foundation. Here’s what’s truly required to do demand planning effectively:

• A clearly defined process: An effective demand planning process must be structured, repeatable, and aligned with business goals. It should define all stakeholders’ roles, responsibilities, timelines, and expectations. The process should incorporate steps for data collection, model development, consensus building, evaluation, and communication—ensuring that each cycle produces more accurate and actionable insights than the last.
• High-quality, clean data: The best forecasts are built on relevant, clean, and complete data. That includes historical sales, customer orders, promotional activity, and external factors like market trends and economic indicators. Without trustworthy inputs, even the most sophisticated models will produce unreliable outputs. Demand planners must work with IT and business teams to ensure data integrity, consistency, and standardization.
• Forecasting approach: An effective demand planning process requires selecting the right forecasting approach, whether it’s bottom-up (built from item-level inputs), top-down (driven by high-level business targets), or middle-out (a blend of both, used to reconcile plans across levels). Planners must also determine the appropriate level of aggregation, such as by item, customer, location, or time, based on how the forecast will be used and the level of noise in the data. The planning horizon must match the decision being supported—ranging from strategic (long-term capacity and investments) to tactical (monthly or quarterly planning) to operational (weekly or daily execution). Since no forecast is perfectly accurate, planners should establish acceptable and expected error thresholds and measure forecast performance to continuously improve.
• Cross-functional collaboration: Demand planning is inherently cross-functional, involving input from sales, marketing, supply chain, finance, and operations. To be effective, the process must include a consensus step, where teams align on a final, agreed-upon forecast. This collaboration minimizes bias, integrates commercial intelligence, and ensures the forecast reflects both statistical outputs and business realities.
• Skilled demand planners: The demand planner plays a critical role as a process champion and cross-functional influencer. Strong planners possess analytical capabilities, organizational awareness, communication skills, and the ability to challenge assumptions objectively. They must manage statistical models, evaluate overrides, monitor forecast accuracy, and facilitate dialogue between departments.
• Focus on continuous improvement: No forecast will be perfect, but the goal is to improve continuously. That means measuring forecast accuracy and bias, tracking value-added steps, and adjusting models and inputs over time. Each forecasting cycle should yield better insights and inform more intelligent decisions.
• Executive support and integration into business strategy: Demand planning must be embedded in the organization’s decision-making processes with strong executive support to ensure it has the visibility, tools, and authority to drive change. Gaining buy-in from key stakeholders is equally critical, as it builds alignment, promotes cross-functional engagement, and reinforces the value demand planning brings through improved customer service, operational efficiency, and business performance.

Demand Planning: Best Practices

Once the foundational elements are in place, adopting these best practices ensures demand planning becomes a value-driving process that adapts to change and supports better business outcomes:

• Understand the purpose of forecasting: Clearly define why you are forecasting—whether for financial alignment, production planning, or service optimization—to tailor the process accordingly. Anchor the planning process in key business questions and explicitly state the assumptions driving forecast changes and decision-making.
• Identify demand drivers: Analyze internal and external factors—such as seasonality, promotions, economic trends, and customer behavior—that influence demand patterns.
• Gather relevant inputs across functions: Incorporate insights from sales, marketing, finance, and operations to ensure the forecast reflects a broad and informed perspective. Cleansing and structuring data is essential to ensure accuracy and consistency, providing a reliable foundation for effective forecasting and informed decision-making.
• Track forecast performance regularly: Measure and report forecast accuracy and bias at appropriate levels of aggregation to continuously improve planning effectiveness. Forecast errors and metrics help us identify uncertainty and bias, allowing us to communicate them clearly, prioritize errors in high-value products and items, and improve forecast accuracy through better inputs and process refinement.
• Schedule timely and recurring meetings: Regular forecast review meetings enable collaboration, resolve conflicts, and build consensus around the final demand plan. Demand planning should act as a hub for cross-functional alignment, bringing together departments to drive consensus and accountability.
• Communicate and manage results: Share insights and results across the organization, highlighting successes, identifying gaps, and reinforcing the value of the demand planning process.

What Skills Do Demand Planners Need?

Effective demand planners must combine analytical expertise with business acumen to interpret data and translate it into actionable insights. They need strong communication and collaboration skills to work cross-functionally with sales, marketing, finance, and operations, facilitating alignment and consensus. A deep understanding of forecasting techniques—from time series models to causal methods and emerging AI tools—is essential to building and evaluating accurate forecasts.

Demand planners must also be adept at managing uncertainty and bias, using metrics to identify errors, and continuously improving forecast performance. Critical thinking and problem-solving abilities are key to challenging assumptions, evaluating overrides, and navigating business complexity. Equally important is the ability to act as a process champion, ensuring the planning cycle is structured, repeatable, and aligned with strategic goals. Ultimately, demand planners serve as integrators across the organization, requiring a balance of technical skills, strategic thinking, and emotional intelligence to influence without authority.

The Future of Demand Planning

The future of demand planning is rapidly evolving into a more strategic, technology-enabled, and integrated function that drives value across the entire enterprise. Fueled by advancements in artificial intelligence (AI), machine learning, and predictive analytics, demand planning is becoming more precise, automated, and responsive. These technologies allow organizations to analyze vast amounts of real-time data from sources like point-of-sale systems, distributors, and suppliers, enabling more accurate forecasts and timely decisions that reduce waste and improve customer service.

As forecasting tools become more sophisticated, the demand planner’s role will shift from generating numbers to generating insights, focusing on scenario planning, cross-functional collaboration, and business alignment. Demand planning will continue to integrate with S&OP and IBP processes, connecting operational planning to financial and strategic goals. With global supply chains becoming more complex and volatile, demand planners will be expected to manage greater uncertainty while maintaining agility and discipline.

However, as Eric Wilson of the Institute of Business Forecasting (IBF) cautions, the successful integration of advanced technologies requires more than just investment—it demands alignment with business strategy, proper implementation, and upskilling teams to interpret and act on AI-driven insights. Without these, organizations risk underutilizing powerful tools or making misaligned decisions. Done right, the future of demand planning is not just digitality becoming a central pillar of strategy and competitive advantage.

Demand Planning 101: The Final Word

The world of demand planning is rapidly evolving. However, the reality is that companies that don’t practice it must jump on board. If they don’t, they risk losing out to competitors who do. Demand planning will help you satisfy consumers, run your organization efficiently, and drive dollars to your bottom line.

Leverage the information in this guide—and the other resources available through IBF—to launch and optimize a demand planning practice at your company.

A while back I had the chance to switch from a demand planning role reporting to Sales, to a demand planning role reporting to Operations. I didn’t know it at the time, but that question has been debated for a long time in our field: where should a company’s demand planning and forecasts be done? Should it be a commercial function or an Operations function? Since I have worked on both sides of the equation, I’ll delve into the pros and cons of each and add my two cents to this discussion.

Option 1: Demand Planning Being a Part of Sales

I have to say that when I worked in Sales and reported to them, it was much easier to find out what buyers did and when they were doing it.  When demand planning and forecasting are done by the commercial side, customer wants and preferences can be better understood. Sales teams have first-hand knowledge of market trends, how customers act, and other details that can have a big impact on making accurate predictions. I found this easier to predict what demand will be, which will in turn make customers happier in the long run.

Also, when I worked more closely with Sales, I was able to get information faster and talk to customers in their own language. Because I was close to the market, I could get a better idea of what customers really wanted at that moment, respond quickly to changes in the market, and change my forecasts to match.

On the other hand, a lot of what I did was aggregate up demand that was often unchecked and not without bias. Also, my forecasts were only good for a few weeks, and salespeople usually focused on short-term goals and targets, which can sometimes overshadow the need for long-term planning. Pressure to meet short term sales goals would cause sales people to overestimate demand, which would lead to too much inventory or not enough.

One last thing I’d like to say is that when I was in Sales, my company moved me to Operations partially because there were silos and no link to the supply side.  I found that the commercial side may not fully understand how the supply chain works and what its limits are. Demand Planners may miss important information about production capacity, lead times, and inventory management if they don’t have a strong link to the operational side. This gap can lead to extra inventory, stock-outs, and higher expediting costs, as we saw for ourselves.

Option 2: Being a Part of Operations and the Supply Side

While I could better communicate with customers when I worked in Sales, I could better communicate with the business when I worked in Operations. By combining demand planning with operations and supply, Demand Planners get a full picture of the whole supply chain. They can make sure that the right number of resources are used by matching forecasts with output capabilities, inventory levels, and logistical constraints. By having me work in operations, we were able to reduce inventory, cut down on stockouts, and improve the general efficiency of operations.

Full disclosure: We didn’t make inventory and cost improvements simply by giving me a new boss under Supply Chain. We also made a collaborative workplace. A bigger benefit of moving from Sales to Operations was that, with company backing and my independent mindset, we were able to break down silos and work together across departments. Putting demand planning in Operations helped different teams work together like Sales, Procurement, Production, and Logistics. By breaking down silos and dealing with people from different departments, I was able to make sure that my forecasts matched what was going on in the business. This gave me a more synchronized way to meet customer needs.

I now also have an organized monthly demand review with Sales, which didn’t exist before. However, I’ve lost some of the customer insights I had because I was so close to customer in my old job. There may be a delay in getting information, and I have lost some of the insights I used to get. This lack of information about customers can make it harder to make correct predictions. This is something we did notice at first (at the beginning my move actually made my forecast error a little worse) but this was made up for by better inventory management and a more efficient supply side.

The key learnings here for me were to make more of an effort for close collaboration with the commercial side and a structured process such as S&OP becomes essential.

Option 3: It Doesn’t Really Matter

Working on both sides and moving around taught me that it really doesn’t matter. There are good reasons for both choices, but the best place for demand planning and forecasting in a company relies on many things, such as the industry, the structure of the organization, and the strategic goals. I think the key is how the person doing it thinks about it and how all the functions work together.

In the end, the priority is to encourage collaboration between different parts of the business and make sure that Demand Planners have access to useful data and insights from both sides. This can help make planning and predicting for demand more synchronized and flexible, which is good for the business as a whole.

It was a Monday morning sometime in mid-July. It was a hot and muggy day and, with the traffic, seemed like an extra-long commute to work. I still was able to get to work just a little early and grab my cup of coffee when the HR manager, the Director of Marketing, and the VP of Supply Chain popped into my office and asked if had a second to talk…

Obviously, my stomach was now in my throat as I sat uneasily in my office chair. The HR manager spoke up and said with a smile “Dan, we have done a reorganization and, as of today (I braced myself for what was coming next) you will be reporting to Supply Chain and we have elevated your role to a senior manager position. John, the VP of Supply Chain, is your new boss.”

Up until this day I had worked playing with analytics to support Sales and Marketing at a company that does contract manufacturing for a range of consumer goods, based on the East Coast. Given I was good with numbers and the company always needed a forecast, I was promoted into the role of business forecaster. I had always worked on the commercial side of the business, so I was a little taken aback when faced with this new Supply Chain new position, and I admit I was more than a little apprehensive.  Even though Supply Chain used my forecasts, I did not know much about their side of the business, and I feared my new boss didn’t know much about what I did either.

Not discouraged though, I saw this as a new challenge and opportunity to grow so I packed up my box and moved from the second-floor carpeted offices to the shop floor with concrete floors and noisy machinery. This alien environment did not inspire confidence. Even though it was the same building and same company, these two parts of the organization seemed worlds apart. Over the next few months, I was going to find out just how true this was.

That afternoon I met with my new boss. I sat across from his desk and his first words were, “I needed you on my team. Those Marketers are killing my Supply Chain costs with their aspirational forecasts. I need you to help get me a better forecast.” In my mind, being one of those Marketers, I explained it was a good forecast and that we had best-in-class MAPE of under 20%, to which he replied, “So where are my savings, why is my inventory still growing, what does that mean to me?”.

I sat there and did not have an answer. It was a reasonable question that I don’t think anyone in the organization could have answered. The only idea they could come up with was to move me to a new department and hope that fixed something. Good news is it did, but not for the reasons they thought.

A year later I was in my new boss’s office discussing how things were going. By this time, MAPE  had increased to 24% but that was not a worry or even a concern because inventory levels had decreased by 20% and supply chain cost reduced by 3%. All the while, Marketing and Sales were happy and we saw service levels as high as they had ever been. It turns out that what we needed was not to take me from one side of the business to the other but bring these two sides of the business together.

What We Did Differently

I went into my new role not fully understanding Supply Chain and their needs. My fear was that my new boss and Operations did not fully understand forecasting and what I did. I discovered both were partially true. What we had was less of a forecasting problem and more of a communication problem and the two teams talking over each other instead of with each other. Over the course of a year, I help build a consensus forecast as part of a newly developed S&OP process that tore down some of these silos and helped bridge the divide. I turned the challenge of a new role into an opportunity for the entire organization.

We Stopped & Listened

By listening, you begin to hear common themes and legitimate concerns. Both Sales and Marketing and Supply Chain assumed the other side didn’t understand their point of view and what they needed from the other to add value to the company. Of course, both sides wanted what was best for the company, but were approaching from it a siloed perspective.

When listening to Supply Chain, Sales and Marketing learned they had long replenishment lead times and struggled because the product mix kept changing and promotions would be dropped in after they ordered product. They had goals relating to lower costs that their bonuses were tied to and had a list of projects they were working on to make sure they got them. One example was to close a West Coast distribution center (DC), consolidate inventory, and ship from a Mid-West DC. They didn’t feel other functions were helping them be successful.

When Supply Chain listened to Sales and Marketing, they learned they needed to increase revenue year over year. There was a West Coast customer they were trying to develop and it was feared that redeployment of inventory would cause stock issues and extra lead time that may lose this important account. They also struggled with having to run promotions to support sales targets, but never having the right stock in place to support the subsequent increase in demand. From the point of view of Sales and Marketing, it seemed we always had the wrong things in stock and, just like Supply Chain, they didn’t feel other functions were helping them be successful.

We Changed What We Forecasted

It was quickly apparent, after hearing both sides, that they both needed a forecast but for a different purpose. Sales were concerned with the customer comping their sales and if marketing campaigns were delivering incremental revenue. For this, forecasting at higher levels and what was occurring next month or quarter end was sufficient. In Operations and Supply Chain, they needed to understand product mix and where it was shipping from. To do their job better they needed item and location and foresight into demand 90 days or more in advance.

I started doing segmentation as a joint exercise to better understand key items and drive improvements to forecasts on those items. We developed forecasts at the lowest level of granularity (item/location/customer) through a middle-out approach, providing better insights to both Sales and Operations. We also extended our planning horizon out beyond 3 months and to include a rolling 12-month outlook. This picture of demand allowed for actions in Operations and Supply Chain to be taken ahead of time with the uplift of promotions baked into the forecast.

We Drove Communication Through An S&OP Process

The most critical evolution that we made was the implementation of a monthly S&OP process. This helped build communication and a consensus plan. Having a monthly forum allowed people to work towards the same numbers and similar objectives and understand each other’s needs. A consensus plan helped build adherence to the forecast and got everyone on the same page.

In these meetings we would discuss exceptions in the forecast and communicate impacts of changes within defined planning time fences. If I may say so myself, I played a key role in these meetings that went far beyond providing a new set of projections (as I had done previously). S&OP participants made a commitment to communicate with context, providing additional insights to allow the cross-functional team to fully analyze and optimize decisions. We used a supply review to discuss their list of cost drivers and, as a team, cross-functionally discuss what could be done. In demand reviews, we brought up marketing campaigns months in advance and decided if they could be supported or not.

We Measured The Right Things

In our S&OP, our focus now was margin, revenue, and inventory turns. This helped the different functions to focus on what they both agreed upon the most, the health of the organization. It also made what each function did real in the minds of the participants and connected their objectives—not only to a higher goal but to each other. To support these KPIs we would also get into discussions on service levels, cost savings projects, inventory availability, and even forecast error.

An example of one result that I felt was particularly meaningful: Working together on cost savings projects, we were able to improve our margins. While cost savings was a goal, the company was more concerned with top line growth. My colleagues in Sales were able to use these cost savings to offer rebates and discounts to select customers on items to increase revenue. The net results were that Supply Chain hit their cost reduction targets, Sales hit their revenue targets, and with an improved top line and strategic sales, inventory turns improved also. A win-win-win!

In regard to forecast error, as mentioned above, despite going from 20% MAPE to 24%, we were happy. The reason being that our WMAPE at lag 3 went from 62% to 41%. Although our more aggregated forecast 1 month out had gotten slightly worse, the item and location level forecast that was driving supply improved by 33%.

Conclusion

In retrospect I don’t really think moving me from a Sales and Marketing function to a Supply Chain role helped a whole lot. Changing who I reported to most likely didn’t have an impact in the long run either. What changed things was understanding that the organization had a problem and I was in a position to help solve it. In my opinion, it doesn’t matter where business forecasting reports to and who your boss is as long as you can stay independent and help facilitate communication. It is important for any company to break down silos and find a balance between metrics and communication. Business forecasting—no matter where they put you—is fertile ground to help enable this communication and build consensus-driven plans.

For more insight into forecasting and planning best practices, join us at IBF’s Business Forecasting, Planning & S&OP Conference in Orlando, held from October 19-22 at the Wyndham Orlando Resort. The biggest and best event of it’s kind, it’s your opportunity to learn best practices in S&OP, demand planning and forecasting, and network and socialize in a fantastic setting. See here for details.

A few years back we decided to totally change the way we created forecasts and did something radical – we fired Sales from generating the monthly forecast. The result was more collaboration, less time creating plans, and improved forecast accuracy. The best part? Sales, Supply Chain, and myself were much happier as a result.

The more time I spend in this field, the more I believe Sales should not be forecasting. For starters, we all agree it is not the best use of their time. Secondly, let’s face it, they are not that good at forecasting either. As a Demand Planner now, I personally do not want sales to forecast every customer and item every month – just give me the Cliff notes.

This may not seem radical to some but for us it was a big change. Forecasts had been created by our Sales team since forever and were aggregated up to create plans. It made sense when they started; they were closest to the customer and they were accountable for converting leads to revenue. They knew what was broadly possible in terms of sales so it kind of made sense.

Salespeople Are Not Good Forecasters

The problem, however, is that this process would take a good week or more every month. They needed a long time to generate the forecast, aggregate data, review the top lines, and see if they were hitting plans. The even bigger issue was that while they were close to the customer and had a feeling for what is occurring this month, our forecast needed to be 3 months out so supply chain had enough time to ensure enough product was ready to fulfil demand. When it came to forecasting out 3 months, Sales were, for the most part, simply guessing. They were creating “wish-casts” and not a forecast.

There’s A Better Way To Forecast

When I say Sales are not good forecasters, I am allowed to say that because I grew up on the commercial side of the business. I was a Marketing and Sales analyst who was in charge of aggregating those forecasts and delivering the final plan. Following a move into Supply Chain and having done IBF training and my own studying to really understand demand planning, I found a better way:

• Start with a statistical baseline
• Let Sales know what kind of information you need
• Build a structured process for inputs and review
• Adjust the forecast for what it doesn’t know
• Drive a consensus forecast
• Measure the process and FVA%

Our new way of creating a forecast began with an automated statistical forecast as our baseline. It was my job then to add in outside variables like promotions and other factors. The forecast was then disaggregated and created for each salesperson to add specialized market intelligence and be ready to discuss if there were questions.

Now, on the first Thursday of every period, we have our demand review and we add anything that was not in the plan and finalize a consensus forecast. There are always some additional ad hoc calls and emails prior to the demand review to clarify details on some aspects.

What Happened When We Took Over The Forecast Process?

The end result was that Sales avoided spending countless hours dealing with numbers and trying to create forecasts without the requisite skills. It meant less time spent in meetings and on a computer. It freed up time for them to what they do best: prospecting, selling, and closing.

When I said that Sales shouldn’t be forecasting, that doesn’t mean we don’t want their input. Using a statistical baseline as our starting point, we already know things like level, trends, and seasonality. We know that the biggest selling season happens every summer and that demand on holidays repeats. But there are things we need to know that are not baked into the baseline forecast. Like Patrick Bower said in the comments of one of my recent LinkedIn posts, “ask Sales for more structured data. i.e., new customers, new distribution, new promotions, deletions etc.”

A concern when transitioning to this new process was that Sales would no longer have accountability and we would get less participation and less of the information we need. What we discovered was that a consensus forecast actually drives group accountability and ownership. Collaboration increased with a structured approach that helped them in the long run. As forecasts improved, service improved which facilitated their sales efforts.

One more thing – last year I added a new key performance indicator, Forecast Value Added (FVA) after it was highlighted in one of Eric Wilson’s podcasts (The Magic of Forecast Value Added). This KPI allowed Sales to understand how their input into the process impacted forecast accuracy which fostered more accountability and drove more collaboration.

For more insight into forecasting and planning best practices, join us at IBF’s Business Forecasting, Planning & S&OP Conference in Orlando, held from October 19-22 at the Wyndham Orlando Resort. The biggest and best event of it’s kind, it’s your opportunity to learn best practices in S&OP, demand planning and forecasting, and network and socialize in a fantastic setting. See here for details.

Sometimes things are not always what they seem or how you imagined them to be. Making my start in demand planning a few years back, there were some important lessons that I had to learn. The following are 5 lessons, or ‘revelations’, that came to me while on the job that would make me a better Demand Planner.

1. Not Everyone Thinks Like Me

There is a tendency to believe that everyone is just like you are, and they think like you do. I admit I used to fall into that mental trap myself. I am a very analytical, logical person and, when starting in forecasting, I thought everything would be about presenting numbers. Numbers represent facts and that’s pretty cut and dry, right? Turns out not everyone understands what I do, or even cares about it.  They are not impressed by the models I use, correlations I found or that my mean absolute percentage error is better than average.

To do my job better I needed to start thinking like a salesperson, supply planner and marketing professional.

But they are impressed by how the insights I provide into what may occur impact them and why things are occurring now. To do my job better I needed to start thinking like a salesperson, supply planner, marketing professional, and even executive management. I needed to learn that not only do people not think like me, they’re also not interested in the technical aspects of my job – they just need the information that is relevant to them and helps them do their jobs better.

2. Numbers Are Not As important As Results

I am not just referring to metrics and measuring accuracy. While those are important and we should measure the results of our forecasts, I have learned it is even more important your forecast has a purpose. I remember being proud of a monthly forecast I was creating with pretty good accuracy one-month out only to find that manufacturing wasn’t even using my numbers.

They needed weekly forecasts and an outlook for what was going to happen sixty days from now. We can create the best, almost perfect, forecast but unless we are delivering what the company needs, when they need it, and in the right format – the results are meaningless. I needed to go beyond the numbers and adapt to who is using my forecast so they actually added value to the business.

3. It Is Not What You Know But Who You Know

Coming into my first forecasting role I started learning statistical models and analytics and even some machine learning. I had a lofty goal of creating the ultimate forecasting model that would be nearly perfect.

What I learned the hard way was that my model never predicted the new marketing campaign we were getting ready to start, the customer that was closing just because he decided to retire, or the product that sales incentivized with a contest last month. It turned out that what was better than my complex models were simpler models with more collaborative inputs.

4. It Is Not Always Our Fault

What I have discovered through developing and presenting forecasts is not that the forecasts are always wrong, rather the users don’t always understand what you are presenting. Using a weather forecasting analogy, if I was to just forecast it was going to be between 60- and 80-degrees Fahrenheit, it would not be hard to be accurate. Forecasting that it will be exactly 77 degrees is a lot trickier.

Accept uncertainty as fact of life, and then work to manage that uncertainty.

People generally look for a number instead of a range and no matter how often I give them a range, they still only wanted a number so that’s what I had to provide.  The lesson I learned here as a Demand Planner was not that my forecasts were rarely going to be accurate. And, instead of perceiving that as a failing, to accept uncertainty as fact of life, and then work to manage that uncertainty.

5. Demand Planning Is Art & Science

Imagine this: I’m putting my final touches on this month’s forecast and I’m adding in a promotion we are going to run. Marketing thinks it may add 10% while Sales thinks only 6%.  After detailed analysis behind the scenes and a little bit of voodoo, I add an 8% lift. Not because I am lazy or fully trust Sales and Marketing and just go with an average, but there is a lot of this that goes into every month’s forecast.

As a Demand Planner, I am managing assumptions more than I am managing a black box.

I think the biggest lesson out of all of these that I have learned as a Demand Planner is that I am managing assumptions more than I am managing a black box or magic wand. Foundationally, what I do is science-based but I have found there is just as much art to it as well. It is understanding how to communicate and ensure my forecast is being utilized. It is working with others and planning for what the number is but also what to do when the number is not exactly that. It is building a statistical baseline and sometimes even using some judgement to develop the best demand plan possible.