What is demand planning and forecasting?

Demand planning and forecasting is a business process that involves predicting future demand for products and services and aligning production and distribution capabilities accordingly. It involves a number of different business functions and requires the sharing of timely data, accurate processing of this data and agreement on joint business plans along the supply chain.

The process consists of three parts: 

Demand forecasting: The creation of a projection for unconstrained demand for a product or service over time.

Demand planning: The development of a forecast that reflects known constraints and any possible associated impacts that may occur as a result of external events, capacity (either production or logistics) or changing priorities

Demand management: Influencing demand via the addition (or cancellation) of activity, the increasing or reduction of price, or the rationing or allocation of stock