Opportunities and Risks in Demand Planning: Why One Number Isn’t Enough

Why We Need Both Risks and Opportunities in Demand Forecasts

When we talk about demand planning, it’s tempting to focus on just one forecast number. One tidy figure that everyone can rally around, right? But here’s the thing: demand rarely sticks to our best-laid plans. If we look at only that single number, we’re leaving ourselves open to surprises—and not always the good kind.

Instead, what I like to do is help my clients build a demand plan that highlights both risks and opportunities around the forecast. Why? Because including those extra possibilities doesn’t just add complexity; it makes your supply chain smarter and more prepared. By mapping out both the upside (opportunities) and downside (risks), we give our supply chain team the range they need to make contingency plans that ensure we’re ready for whatever demand brings.

And here’s a critical piece: each opportunity and risk should include quantity and timing estimates. By understanding not just what might happen but also how much and when, planners can take proactive steps with long lead time materials and avoid the high costs that come from reacting last minute. Let’s break down how these estimates make a difference.

Opportunity Scenario: Planning for a Demand Spike

Imagine you’ve got a potential opportunity where demand might surge by 15% due to an upcoming promotion or seasonal event. You can’t be certain the demand will spike, but if it does, you’ll need additional raw materials to fulfill orders.

With this opportunity forecasted, the planner can decide to purchase long lead time materials in advance, just in case. This way, they have materials ready to go if the demand spike happens, ensuring they don’t miss out on sales due to material shortages. Yes, it’s a bit of a gamble, but it’s a calculated one, based on a clear understanding of potential demand quantities and timing. It would be worse, if the opportunity was built into the forecast, and you stocked the warehouse with finished goods, only to find that it did not transpire.

Risk Scenario: Managing a Demand Drop

Now, let’s look at the flip side—a potential risk where demand might drop by 10% if a competitor releases a similar product around the same time. Here, the planner has to be cautious, especially with long lead time materials, which are costly to keep on hand if they’re not needed.

In this case, the planner might wait to purchase long lead time materials until closer to that confirmation date. They’re ready to act quickly if demand holds steady, even if it means paying an expedite fee to get materials in time. This way, they avoid the costs of over-purchasing up front and only commit if the risk doesn’t materialize.

Why Both Scenarios Matter

By building in both quantity and timing estimates, the supply chain is ready to respond, no matter which way demand shifts. For opportunities, early action on materials helps us capture additional sales. For risks, delaying and holding off on material purchases keeps costs lean and reduces exposure.

In today’s market, these kinds of nuanced decisions aren’t just “nice to have”—they’re essential for staying agile and competitive. With clear estimates in place, supply planners don’t have to gamble. They can plan for the best, prepare for the worst, and act with confidence when the time comes.