What Is Demand Planning? A Complete Guide for Retail & DTC Brands
What Is Demand Planning? A Complete Guide for Retail & DTC Brands
Demand planning—on its surface—sounds aggressive, intimidating, maybe even a little scary. But anyone in retail or DTC will tell you this: demand planning is an essential function to master. Done well, it can quite literally make or break your business.
At Boon, demand planning and inventory planning are our bread and butter. But we know for founders, operators, and small teams, this topic can feel complicated and overwhelming. So we’ve pulled together a complete, practical guide to help you:
Understand what demand planning actually is
Learn the core components of a good demand planning process
Avoid the most common mistakes we see growing brands make
See how demand planning connects to inventory management, cash flow, and profitability
And if you get to the end and still feel stuck or behind, that’s where we come in. Our team can take demand planning off your plate and put your sales projections, inventory buys, and cash flow on much more solid ground.
What Is Demand Planning?
Demand planning is the process of preparing your business for customer demand while minimizing excess inventory and supply chain disruptions. In simple terms, it’s your best educated estimate of how much product you’ll sell, where, and when.
You can’t sell what you don’t have in stock—so demand planning sits at the foundation of:
Inventory planning and inventory forecasting
Production and purchasing decisions
Cash flow management
Sales and promotion planning
Demand planning is not a one-and-done spreadsheet exercise. It’s an ongoing, evolving process influenced by:
Shifts in your customer base
Product lifecycle and seasonality
Channel expansion (wholesale, marketplaces, retail partners)
Marketing and promotional activity
External factors like trends, economic shifts, or unexpected events
It’s easy to feel like you’re stuck in a “chicken or egg” loop—needing data to plan, but needing a plan to create good data. The good news? There are structures, tools, and experts that can help you build a reliable demand planning framework long before you feel “ready.”
Why Is Demand Planning Important for Retail & DTC Brands?
When you spend capital on inventory, that cash is tied up until the product sells. If you’re buying inventory without a demand plan, you’re essentially gambling with one of the largest investments on your balance sheet.
Strategic demand planning helps you:
Avoid overbuying inventory that becomes unproductive or obsolete
Prevent stockouts on your key SKUs and hero products
Align inventory buys with your sales forecast and marketing plans
Protect and improve gross margin
Support healthier cash flow and more confident financial planning
Your inventory is both your revenue driver and a major expense. A strong demand planning and forecasting process ensures that every unit you buy has a clear purpose and a path to sell-through.
The sooner you put a real demand plan in place, the sooner you can understand what’s working—and repeat it.
What Information Do You Need for Effective Demand Planning?
Like most things in retail, the first demand plan you build will be the hardest—especially if your brand is new and your sales history is limited. But it’s absolutely possible to start small and build from there.
Here’s what you’ll want to gather:
1. Sales & Inventory History
A skillful demand plan is built on:
Historical sales data (by SKU, category, channel, timeframe)
Historical inventory levels and stockouts
Promotions and events that impacted your sales
If you’ve never sold your product before, you won’t have your own history—but that doesn’t mean you’re stuck. This is where retail benchmarks, industry experience, and planning partners like Boon become invaluable. We can help you understand typical sales curves, seasonality, and purchasing patterns for your category.
2. Sales & Promotions
Your inventory needs during a high-velocity promo are very different from a normal weekday.
You’ll want to track:
The type of promotions you run (e.g., % off, bundles, free shipping thresholds)
The lift each promo drives in unit sales and revenue
How promos impact your gross margin and future demand
This helps you embed real promotional behavior into your demand plan rather than guessing.
3. Key Cost & Operational Metrics
Margins can evaporate quickly if you’re not planning around the full cost picture. Important metrics to consider:
Raw material costs
Production costs and lead times
Freight and shipping costs
Storage and warehousing costs
Any channel-specific fees (e.g., marketplace fees, wholesale discounts)
These are critical inputs in both your demand forecast and your inventory planning and cash flow model.
Steps for Setting Up a Demand Plan
A good demand planning process creates structure for your sales and inventory planning, so decisions stop being reactive and start being intentional.
Here’s a simple framework to get started:
1. Build the Foundation: Structure Your Assortment
Before you forecast anything, define the bones of your assortment:
Create SKU numbers
Build a clear product hierarchy (category, subcategory, style, size, color, etc.)
Clarify your pricing strategy
Define the lifecycle of your products (core vs seasonal vs limited edition)
This structure makes it possible to analyze performance and repeat what works.
2. Choose a Planning Timeframe
Most retail and DTC brands plan demand on a rolling 6–12 month horizon. If that feels like too big a leap, start with one quarter and expand from there.
For each period, ask:
How will demand shift month-to-month?
Are there known seasonal peaks (holidays, weather, gifting, events)?
Are you launching new products or channels that will impact demand?
3. Start Top-Down, Then Go Bottom-Up
Begin with a top-down sales plan:
Total sales by month or quarter
Sales by major category or channel
Then distribute those sales across:
Categories → subcategories → specific SKUs
Channels (DTC, wholesale, marketplaces, retail partners)
Gut-check your assumptions:
Does the unit volume make sense for each item?
If you’re in brick-and-mortar, can store teams realistically sell that many units per week?
Are you planning more units than your capacity to produce, ship, or store?
Eventually, you’ll want a bottom-up demand forecast at the SKU level that can be rolled up to category and total business. This becomes the backbone of your inventory planning and purchasing.
4. Create a Regular Sales Recap & Reforecasting Cadence
This is where a lot of brands fall short.
We recommend:
Weekly sales recaps for quick performance reads
Monthly deeper dives to reforecast and adjust your plan
Based on how your actual sales compare to your demand plan, you can:
Increase or reduce future inventory buys
Adjust reorder triggers
Accelerate or slow down promotions
Update your cash flow projections
A demand plan is not “set it and forget it” — it has to live and breathe with your business.
Common Demand Planning Mistakes to Avoid
We’ve been in the demand planning and inventory forecasting world for a long time. We’ve seen the same avoidable mistakes create big problems for growing brands—especially those between the “scrappy startup” and “scaled up” stages.
Here are some red flags to watch out for:
1. Buying Inventory Without a Demand Plan
Buying inventory “because it feels right” or “because that’s what we did last time” is risky. It often leads to:
Too much cash tied up in unproductive inventory
Overstock in slow-moving SKUs
Stockouts in bestsellers because you didn’t forecast properly by item
2. Not Reviewing Previous Sales Performance Regularly
If you aren’t consistently recapping your sales, you’re likely:
Repeating past mistakes
Ignoring trends in demand or margin
Missing early warning signs of inventory issues
Regular sales recaps and forecast updates are how you break repeat patterns.
3. Not Categorizing Your Assortment
Without a clear product structure:
It’s nearly impossible to see which categories or attributes are driving growth
You can’t tell what’s truly working vs. what’s just “there”
You’ll struggle to make data-driven assortment decisions
Category-level and attribute-level recaps are key for assortment planning and inventory optimization.
4. Not Using SKUs (or Using Confusing Naming Conventions)
We see this often: products named “Yellow T-Shirt” or “Blue Dress” with no SKU system. Then six months later, you add a new version at a different price point or change vendors and the data becomes muddy.
Without consistent SKU-level tracking:
You can’t accurately read historical performance
It’s harder to track inventory levels, margins, and reorders
Any future switch to a better system becomes painful
5. Relying on Gut Feel Without Checking the Data
Intuition is helpful—but it’s not a substitute for data-backed decisions.
If you “feel like” something is your bestseller but your sales reports say otherwise, your buys and cash flow are at risk. Recapping:
Units sold
Sales dollars
Gross margin
Top and bottom sellers
…gives you a reality check that keeps you grounded.
6. Ignoring “What If” Scenarios
A good demand plan acknowledges the unknowns:
Viral moments (we’ve seen brands go viral on TikTok overnight)
Unexpected celebrity or influencer endorsements
Weather anomalies
Website outages or supply chain disruptions
You don’t need to predict every curveball—but you do want a plan that can flex.
How Demand Planning Evolves as Your Business Grows
Once you’ve got a basic demand plan in place, your process will naturally evolve with your brand. Growth brings new complexity—and new opportunities.
Here are a few inflection points to anticipate:
Build Out a More Sophisticated Forecast
As your sales history grows, you can:
Extend your forecast horizon
Layer in more nuanced seasonality curves
Use more advanced demand forecasting techniques (still often in spreadsheets, not just software)
You’ll also need to commit to inventory further in advance—which can feel uncomfortable but is often a sign of healthy growth.
Fulfillment & Lead Time Changes
Moving from self-fulfillment to a 3PL or changing your warehouse setup can impact:
Lead times
Delivery speed
Storage costs
How long you “own” inventory on the balance sheet
Your demand plan and inventory forecast need to reflect these changes so your cash flow model stays accurate.
Scaling Quantities & Negotiating with Suppliers
As your volumes grow, you’ll often:
Negotiate better costs per unit
Commit to larger runs of core products
Possibly test smaller pre-launch or pre-book quantities to get early reads
Demand planning helps you balance cost optimization with inventory risk.
Increasing Storage Needs
More inventory = more storage.
Whether you:
Rent your own storage
Use a 3PL
Or ship to multiple retail partners
…you’ll want your inventory planning to reflect the true cost of space and logistics.
Channel Expansion
Adding wholesale, marketplaces, or brick-and-mortar changes your:
Inventory allocation strategy
Lead times
Margin structure
Demand variability
Multi-channel brands need a more robust, channel-aware demand plan to avoid stockouts in one channel and overstocks in another.
Pairing Your Annual Plan With a Rolling Forecast
As you scale, it’s helpful to create:
An annual or seasonal demand plan and inventory plan
A monthly rolling forecast that updates based on real trends
This gives you structure and flexibility—and lives at the heart of strong demand and inventory management.
Set Your Business Up for Success With Boon’s Demand Planning Support
When it comes to saving money, protecting margin, and supporting sustainable growth, your demand plan is one of the most powerful tools you have.
We hope this guide gives you a clearer understanding of:
What demand planning is
Why it’s essential for retail and DTC brands
How it connects to inventory planning, cash flow, and profitability
But we also know demand planning, sales forecasting, and inventory management aren’t second nature for most founders. You’re already stretched thin running the rest of the business.
That’s what we’re here for!
We specialize in helping product-based brands build and manage demand plans that are:
Strategic, but practical
Customized to your assortment, channels, and stage of growth
Designed to protect your cash, reduce inventory risk, and unlock profitable scaling
We can quickly set you up with easy-to-use demand planning tools, processes, and ongoing support—so you’re not guessing, you’re planning.
👉 Ready for a smarter demand plan (without adding headcount)?
Book a call with the Boon team to explore personalized demand planning and inventory support for your brand.
