Demand planning is the analysis of sales as well as consumer trends, historical sales, and seasonality data to optimize your company's ability to meet customer demand in the most efficient way possible.
Effective demand planning means having the right balance between sufficient inventory levels and customer demand. This is crucial for your company because excess inventory locks up your working capital, adds inventory carrying costs, and increases the potential that you’ll be stuck with low-value or obsolete inventory (deadstock).
Alternatively, poor planning can leave your company short on inventory, which can result in backorders, stockouts, and missed sales. All of these issues lead to dissatisfied customers.