Pros and Cons of AI in Demand Planning in 2023

Pros and Cons of AI in Demand Planning

When it comes to planning demand for a product, there are a lot of measures taken. These measures help the suppliers of the product to know the quantity they are to deliver, so there won’t be an excess supply of the product in the market space.

But due to the fact that it is difficult to measure the rate of demand for a particular product. The need for AI technology in demand planning is in high demand.

Since 2021, the need for this model of AI technology has been on the rising side. A lot of marketing companies as also taken special training on how to offer demand planning skills so AI technology won’t take away their job.

Even with how a lot of marketing experts are embarking on training in making the right decisions on demand and supply in the market. Only a few of them have gotten better in this aspect.

And as you know, having a proper accurate plan containing needful information on the demand market for a particular product boosts the marketability of that product.

That’s why in this article we are going to give you important information on how AI technology is used in Demand Planning and also the pros and cons of AI in Demand Planning as well.

What is AI in Demand Planning?

Employing AI technology in Demand Planning is the use of AI to analyze the demand market before supplying the specified product.

What the statement “analysis on-demand market” means is the use of AI technology to take in the number of people who has an interest in the products currently and also to take into account the people who once took the product before.

Also, it means AI technology is used to take into account every reason that surrounds the “Why” when the product got the interest of potential customers.

All these and more are what the AI-technology takes into account when planning the demand for a product.

All of these require a lot of research done both on the current markets and the previous markets.

And a human demand planning expert doing this is going to use a lot of resources to get the right data and necessary information.

And since there is going to be a lot of information and data to be analyzed, a lot of time is needed as well.

But a Product Producing Company using AI technology enjoy a lot of advantages over their competitors who are not using AI technology.

AI technology works with data. The AI technology developed for demand planning are well equipped with lots of information and data statistics that are helpful in the research.

This alone is a huge advantage to the product Company. Not to talk of the huge analytics ability of AI technology which is very fast and accurate. All of these combine makes using AI technology in the demand planning of company products a smart decision.

But as it seems to be a smart decision there is also another side of it that makes it appear to be a dumb decision.

But don’t worry you will get to know the reason for these decisions in the few lines. Before that, let’s get to know the root cause of supply chain problems.

Identifying the root cause of supply chain problems

Every seller and producer of any product usually has a major problem in getting to know the quantity of products they should supply to the marketplace.

To have an accurate estimate on the number of products they should supply to the marketplace requires getting sufficient information on the demographics of the people who are interested in the products. This is a guaranteed to help with this.

And producers and sellers can employ the help of either human resources or AI technology resources. Both help is useful. But in terms of accuracy and speed, AI technology has an edge over human resources.

But if the main problem of the supply chain is not ascertained. Even if one is using AI technology in demand planning, there won’t be many results produced.

For this reason, the suppliers and the sellers of a product need to make adequate research to determine the problem of the supply chain.

Identifying the root problem makes it easy for the suppliers to know how to use AI technology to generate good-quality results.

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How to use AI technology in Demand Planning

When involving AI technology in demand planning, there are ways to fully utilize it. In the next few lines, you will get to know the best ways to use AI technology to get order data.

Just as said earlier, AI technology works with data. Using AI technology to get your order data for a product is insightful.

It is important to know that order data and sales data mean two different things. Order data is the record data of the number of orders successfully delivered to the customer.

It is also the number of times a seller or product creator satisfied his customers. This data is taken for each of the customers.

The number of orders delivered successfully, the products delivered, and much other information related to the order.

But if you have a high record history of successfully delivered orders, I.e. high one-time-in-full (OTIF). You don’t need to take order data of your customers.

When taking data for your order history as a seller, take data that dates down to around 5-6 years.

You should do this so you can avoid errors in data history. There are times whereby the order trend isn’t doing the normal trend it usually displays.

But by taking order data that has a longer time-lapse, you will be able to escape this kind of error.

Not only that, but you will also be able to know the reason why the order spiked at a particular time of the year and vice versa.

Since you are using AI technology, just put the data into the interface of your AI software. The AI will do a more in-depth analysis of the data.

With informed information on the order data, Sellers and product creators can make more informed decisions on the amount of supply they need to deliver.

What are the data that AI technology uses in Demand Planning Process

When carrying out demand planning processes, AI technology just like humans takes in certain important data to do its analysis.

These factors it takes into account include both internal and external factors and they include;

1. Data on the pricing system of the product

This is a great determinant when it comes to making decisions on the quantity to supply. These factors put the seller and the supplier in serious contemplation.

But with AI technology, you can easily solve this problem. Since the price of a product determines how fast the product will sell out of the market.

You should let the AI technology use the data in its database to make the pricing decision for you. AI technology helps you to select the best price for the product with ease.

2. Data on the income of consumers

As a supplier or a seller, you need to have information on the income standards of your customers. Having this knowledge will help you to know the kind of products you can sell or deliver to them.

But it can be very difficult to get this kind of information. But with the help of AI technology, it is easy-peasy. Just set up the AI technology to keep track of their spending lifestyles.

I know you probably thinking, “How do you use AI technology for this kind of task?” Currently, everything is now moving to the digital space.

It doesn’t matter whether the product is an offline product. A lot of companies are now advertising their offline products in the online space. And there are options to make the payment online.

So, with AI technology tracking your customers’ spending lifestyles. You can easily prepare products that match your customers spending lifestyles.

3. Data on the number of your buyers in the market space

Now, here is another important detail that every seller or product creator needs. You need to know the number of buyers of your product before delivering it to the market space.

This information allows you not to deliver excess or low quantities of your product into the market space.

Having accurate information on your product’s buyers allows you to make some manipulations to the market as well.

It can be difficult for a human demand planner to get this information. But with an AI-technology this is a different story.

AI technology for this kind of data easily surfs the net and gathers the number of your buyers. And even gives you information on where to find them.

4. Data on what customers need from your product

When producing a product, one thing you don’t want to do; is to deliver what your customers don’t need.

Every customer has what he needs from a product he is using. And once he is not getting that need satisfied, he won’t purchase the product.

Getting to know what your customers need from your product can be difficult. With AI technology, it is very easy to discover what your need from your product.

The AI has a very powerful ability when it comes to getting information. So using it to get information on what your customers need from your product is a smart decision.

And once you satisfy your customers’ needs, it is guaranteed that you just got yourself loyal customers. And your product will sell out of the market faster.

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5. Data on the taste and preferences of your customers

This is another important data that you can use AI technology to take. It is one thing to know what your customers need and it’s another thing to know how to deliver to match their taste and preferences.

After identifying your customer’s needs for your products, you have to know how to deliver to satisfy their taste. With AI technology you can easily discern how you should deliver your products to them.

Having returns on products ordered is bad for the market. So to avoid this, use AI technology to make research on how your customers want the products to appear.

There is a saying that says, “You can’t truly satisfy everyone.” So when using the help of AI technology, ensure you take in the taste and preferences that have the higher data.

This way, even if you won’t satisfy everyone, you will at least have satisfied the majority of your customers.

6. Data on substitute products

Yea, although it might appear here as if you don’t need AI technology for this kind of research. The fun thing is AI technology is very helpful as well in this aspect.

Most especially when you are offering products that are available online. AI technology has a very huge advantage in the online space as it is moving amongst other algorithms.

Since it is an algorithm as well, getting information online is very much easy. And with AI technology, you can easily have access to all the information of the substitute of your products delivered to you with no stress.

What AI Tools Can Demand Planners Use?

1. Infor Demand Planning AI tool

This software is very good at providing predictive forecasting. And also, it provides an AI model that is very helpful in determining the demand information of customers. It uses the trend advantage to get adequate data on customers’ demands.

To get this data; it uses the sophisticated model on its interface to do this. Also, Infor Demand Planning knows how to make the supply chain more visible.

So, sellers or product creators using it get clarity on the supply chain they are to use for their products. This way, the products will be delivered to the location where it is the base of the customers.

2. Logility Demand Optimization Tool

Logility is software that helps product creator to optimize how they replenish the products that have sold out.

It uses the analytics and performance reports of the product to provide information that is useful in making restocking decisions.

With the reports on the performance and analytics of the products, sellers and product creators can make long-term decisions. This way, any event that can disrupt the supply chain can be prevented easily.

3. Kinaxis Rapid Response AI Tool

Kinaxis is a response reply tool that offers out-of-the-box query tools. It also offers data visualization based on the activities around the reply it generates.

And of course, with this data information. You can make swift decisions on ways to go about the product description you are passing across through text.

With this tool, it is easy for you to make plans as regards the demands of your product, how you render the supplies, and the types of products you can supply to the marketplace.

4. SAP APO (SAP Advanced Planning and Optimization)

SAP APO is a good demand planning tool that uses logistics to make plans on demand. It is due to this that it is termed as q comprehensive tool for demand planning.

It creates an accurate system that is very reliable for demand planning. It also offers different sections for the supply chain. Therefore, making sellers have different avenues to run their supply chain.

With the knowledge of AI tools that are very reliable for Demand Planning. We should get to the pros and cons of AI in demand planning.

Pros and Cons of AI in Demand Planning

Pros of AI in Demand Planning

This information is just to enlighten you on the benefits you get when you use AI in your business Demand Planning.

1. It saves time and energy spent in manual demand planning processes

It is quite daunting when you have to do another demand forecast after you just finish completing one forecast.

A single forecast alone is very demanding not to talk of doing it over and over again. It takes a lot of time and resources to do an accurate forecast easily.

As you will have to go through data from past weeks. And then analyzed them so that you can come to an accurate demand planning.

Not to talk of the time you as a seller will have to waste waiting for the demand planner. You will even have to spend resources on the demand planner so he can deliver a good job.

The fun fact is that, if you are using AI technology you won’t go through this stress at all. With just a tap of a button.

The AI tool takes in the prompt and then starts to do its analysis using real-time data on the internet as a base for analysis. The analysis done by AI technology is very fast and efficient.

2. It offers accurate demand forecasts

The foundation of accurate demand planning is accurate demand forecast. But the problem is getting an accurate demand forecast is not easy.

You as a seller will have to spend a lot of resources to get the right data for the forecast. Getting accurate demand forecasts as a demand planner yourself is not an easy task.

As you will have to spend a lot of time and resources to do a proper analysis.

Using AI technology for this task is like a cheat. You can cut down the amount of time and resources you are to spend on the demand forecasting process.

Since it is AI technology, it has a huge advantage of using it internally to get the right data and information it needs to make accurate demand forecasts.

Even though AI is going to use lots of data and information for its analysis. It is still very fast at arriving at an accurate demand planning system.

3. It uses both external and internal data for its analysis

Indeed, AI technology is not that good at combining data from external sources with internal sources.

But there are still some odd AI tools that can take in data from external sources and then combine it with internal sources.

So it uses these data sources to perform its analysis for the demand planning of a particular product. To be honest with ourselves, using analysis from these two main data sources combined makes the final demand planning conclusion much more effective.

And one cool thing about AI is that it can use current data in the economy to do its analysis.

So, you can rest assured that your demand planning conclusion has been tested using current data like weather forecasts, seasonality, sector-specific price indices, mobility data, economic data, and many other real-time data.

4. It can swiftly respond to rapid fluctuations in the market

There is one common trait that is important in the market. And that is swiftness in making decisions. In the market space, there are times whereby major events affect the market order.

Just like in the case of COVID-19, the demand for some products was affected. And due to the sluggishness in making swift demand decisions of some companies, they had to close down.

It can be difficult to keep track of swift changes in the market as a human. But with AI technology, it is a different story.

AI technology offers automated analysis as it keeps a tab on the changes in the market. Most especially the changes in demand.

5. It builds up data science skill

AI technology is known to have good data science skills. Due to this advantage, people that don’t have any skill or knowledge of data science can enjoy premium data analysis.

With just a tap of the button on the software interface, you can have well-detailed and analyzed data content within minutes.

And since accurate data is the foundation of good demand planning. Individuals can easily have accurate data to make effective plans on the demand of their market.

Cons of AI in Demand Planning

It is not enough to know just the pros. You have to know the Cons as well. Knowing both allows you to know how to use AI technology to the fullest.

1. AI Algorithm nature

The algorithm of AI technology is not said to be unlimited. It is limited by a lot of factors and that is the normal nature of the AI Algorithm.

As a result, when using AI technology for demand planning. There is a need to know what the AI technology model you are using can do.

Having this knowledge makes you know how what to use the tool for. Although, the fact that AI technology is limited is a big disadvantage.

But when you know the limitations of the software and know how to play around with it, then we can say it is not a huge disadvantage.

2. AI Algorithm can’t do much

The AI algorithm is indeed very good at getting good data and providing correct data analysis for demand planning.

But things have to be set right with the customers of the product creator or seller. AI can indeed create a good supply chain for a seller or product creator.

But if the supply chain system created by the seller or product creator is not good enough, the AI model won’t be able to generate a good result.

That’s why a seller has to put in the work to create a good system. AI technology is just there to complement and amplify the effect of the work already done by the seller or supplier.

3. AI Algorithm is not fully trusted

There is this popular saying; “An Algorithm that is reliable and not trusted will be of no use to the company using it.”

It is not a new thing to hear that marketing staff in workplaces don’t trust the work of AI technology.

And due to this mistrust, a lot of games are played so that the company doesn’t end up using AI technology.

Though their mistrust has ground in places whereby AI technology is not reliable.

But if AI technology is a reliable tool, then even though marketing staffs doubt it, they should still try it out and see its results. This way, AI technology will be much more in use.

4. Overly dependent on AI technology forecast for demand planning

Since AI technology is very good at getting accurate forecasts on demand for a product. It does guarantee that the demand planning is going to be a huge success.

Yea, an accurate forecast is indeed the foundation of accurate demand planning.

But if other factors are not put into place, the supply chain of the system might not be able to meet up with the demand planning generated with an accurate demand forecast.

That’s why there is a need to make more preparation in setting up the supply chain to meet up with the standards of the demand forecast generated by AI.

And that will be very possible if staff won’t rely solely on the demand forecast generated by AI technology to plan their demand.

That’s why it is advisable to consider other factors when planning the demand for a product.

5. Using accurate AI demand planning for your products can reveal errors in the supply chain

AI technology is known to be very good at delivering accurate results all the time. As much as this sounds like an advantage, it sounds like a disadvantage as well.

It is a disadvantage to people whose supply chains are not of good standards. Because when these groups of people use AI technology in their supply chain.

It is going to reveal the errors in their supply chain easily. And as a result, they might have to make their supply chain to be of standards with the demand plan.

If the supply chain does not match the standards of the demand planning. There is no way the supply chain is going to produce the results the demand plan has set.

With the few points above, it is sure that you have at least some ideas on the effect of AI technology in demand planning.

And with this knowledge, you can build more experience on how to go about AI technology in your business demand planning.

Frequently Asked Questions

How can AI be useful in problem management?

There was a point in this article when we talked about Identifying the problems affecting demands before planning a demand.

This is a problem that AI technology can solve. With the advanced data analysis that AI technology for this kind of task possesses.

They can handle problems rightly and then provide solutions that counter the problem.

AI uses the algorithms in its interface to gather and process both structured and unstructured data that humans can’t even process.

It does the processing easily and within minutes the solution to the problem affecting demand is available.

Also, individuals can use AI technology to identify problems that are not yet known. This way preparations can be done to counter the problem.

How does AI technology use data to make decisions?

AI technology is groomed with data structures only. So, with access to a lot of data, it can easily analyze them and then take in the data that have similar patterns together.

Once it understands the information in the data it collates together. It makes it the best possible prediction.

It is mostly said that AI decisions should not be fully used. Instead one can use the decisions AI technology provide to make an even more informed decision.

What roles does AI technology perform in decision-making and problem-solving?

In solving a demand problem and making a good plan that can meet up with demand trends in the market, AI is reliable for this.

AI technology possesses models and algorithms that are built mainly to decrypt data and then train to come to the best decision using the data.

So, when we are talking about the role of AI technology in decision-making. We can say AI technology helps us to come to a decision faster by analyzing numerous data within seconds.

With the super-fast computing power of AI technology, it easily processes lots of data and then comes to a decision faster.

AI can decrypt different data that are sometimes difficult to decrypt faster. It is this insane processing speed of AI technology that makes it very useful in making decisions on a particular event.

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It is not today that AI technology just started. That's why AI technology is spreading out its threads to the majority of the field willing to accompany it.

It is why the future of AI technology in demand planning is bright. There is no company that does not require planning the demand for their products.

The majority of companies are suffering from poor demand planning.

With the introduction of AI technology in the demand planning field, it is sure that these companies can enjoy the benefits of making plans on their market demand using AI technology.

All they will have to worry about now is how to operate the AI tools for demand planning. And this is not a difficult task to do.

Within a short time, these companies can already have their staffs learn how to operate this AI technology and then begin to use it in their companies.

With the way this AI technology operates, these staff can even learn demand planning skills over time.

The summary of what is said above is, the knowledge of the Pros and Cons of AI in demand planning is very vital.

With the knowledge of both sides, individuals can use this AI technology to the maximum level and reap the most rewards from it.

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