October 19, 2026 • 9 minute read
Author: Phyllis Jackson, Senior Manager, US Marketing, UPS

Key Points

• Only 36% of retailers report having full inventory visibility, making it difficult to identify and respond to changing demand patterns.1 Predictive analytics and exception management can help organizations respond more quickly to changes in inventory and fulfillment.
• More than 50% of retailers cited predictive analytics as an investment priority over the next 24 months.*
• Demand signal management strengthens inventory performance by supporting better replenishment decisions, improved product availability and more efficient inventory utilization.

What is Demand Planning?

Demand planning is forecasting method retailers use to help determine the type and number of products they’ll need to meet customer demand. With accurate demand planning, retailers have fewer overstocks and stockouts, and customers can find, purchase and receive the products they want across physical stores and online channels.

Demand highs and lows are a normal part of retail. Peak season, promotions, local market conditions and changing customer preferences can all influence purchasing behavior. Retailers that recognize these fluctuations early enough to make informed decisions about inventory and replenishment can respond effectively to changes. Instead of relying solely on historical data, retailers that use demand planning combine real-time demand signals with inventory insights to make more informed business decisions.

In omnichannel retail, inventory must be accurate enough to fulfill:

• In-store purchases
• E-commerce orders
• Buy online, pick up in store (BOPIS) transactions
• Same-day fulfillment
• Returns
• Store-to-store transfers
• Inventory rebalancing

There’s also another layer of complexity: Even if inventory appears sufficient at the network level, it may still create customer service issues if it isn’t positioned to be fulfilled where the demand is. That means making products available through the shopping channels where customers are looking for them and positioning them geographically closer to demand to reduce transit time.

For luxury and premium goods brands, demand planning balances product availability with inventory efficiency. Unsold high-value products tie up cash and extend the time it takes to turn inventory into revenue. But carrying too little poses the risk of missed sales due to stockouts and decreased customer satisfaction.

Agile demand planning helps small- and medium-size (SMB) retailers make connections between customer demand, inventory availability and fulfillment execution, helping retailers maintain service levels while managing inventory efficiently.

“Demand planning isn’t about predicting every shift in customer demand, but it is about recognizing changes early enough to make smarter inventory and replenishment decisions that support your customers,” says Jarret Arnold, Store-Based Retail Strategic Lead, UPS.

How Demand Signals Create Better Demand Planning Decisions

Historical sales patterns are still important, but they offer only a partial view of current demand conditions. Demand signals provide a more current picture of what customers are doing and where buying patterns are changing.

Common demand signals can include:

• Point-of-sale transactions
• Online searches, product page views and cart activity
• Stock levels and sell-through rates
• Returns data
• Promotional performance
• Product launch performance
• Regional purchasing trends

Integrating demand signals into supply chain planning enables SMBs to identify shifts in customer behavior before they affect inventory availability. With a proactive approach, traditional retail and high-value goods brands don’t have to wait for sales reports to confirm a trend. They can use real-time information to support inventory allocation, replenishment planning and fulfillment decisions.

Using Predictive Analytics to Support Supply Chain Predictions

Predictive analytics identifies patterns in operational and customer data. These models analyze past performance and current demand signals to determine what’s likely to happen next.

The technology has proven to be valuable for brands. In fact, results from the UPS “State of Logistics Technology Study” revealed that 50% of retailers cited predictive analytics as an investment priority for their organization over the next 24 months.*

Together, demand signals and predictive analytics enable more accurate supply chain predictions, helping SMBs respond to changes in demand before inventory or customers are affected.

Factors That Influence Replenishment Decisions

Effective demand planning is more than forecasting. True value stems from turning planning insights into inventory and replenishment decisions that support customer expectations.

As organizations expand fulfillment options, replenishment decisions become even more important. Retailers are challenged to align replenishment schedules with how and where customers actually shop and receive products. Replenishment decisions are informed by demand planning insights, fulfillment commitments and inventory visibility.

Demand Planning Insights

Demand signals can help to inform decisions about where products should be positioned and how often they should be replenished. For example, a product launch or regional shift in demand may signal that a particular store location or market needs additional inventory.

Businesses can respond by reallocating stock or adjusting replenishment schedules before demand peaks.

Fulfillment Commitments

A retailer offering next-day delivery or buy online, ship from store services must ensure inventory is available in the right locations to support those customer promises. If inventory is available but positioned in the wrong distribution center or retail location, fulfillment can still be delayed and the customer experience will suffer.

For high-value goods brands, replenishment decisions can have an even bigger business impact. High-value inventory can tie up significant working capital, making it vital for retailers to balance product availability with inventory efficiency. Demand planning and demand signal management can help SMBs maintain optimal inventory levels while reducing the risk of excess stock or unnecessary markdowns.

Inventory Visibility

When SMBs have near-real-time visibility into their stock levels, order activity and fulfillment performance, they can see where products are available and where replenishment priorities need to change.

This agility empowers SMBs to maintain service levels, improve inventory utilization and respond more effectively to changing customer demand.

“For high-value brands, replenishment decisions affect the ability to limit excess stock to help protect margins, preserve working capital and support the customer experience by positioning inventory strategically,” says Rohit Bhalla, High-Value Goods Strategic Lead, UPS.

Why Exception Management Matters in Demand Planning

Even with the strongest demand planning processes, there’s always uncertainty.

Supplier delays, transportation disruptions, unexpected sales increases, regional demand shifts and other supply chain disruptions can create conditions that require a response. Exception management helps retailers identify these situations and determine where they need to intervene.

Identifying exceptions often depends on inventory visibility. Only 36% of retailers report having full inventory visibility, while 57% report at least minor visibility issues.¹ Without the right visibility into product availability and order activity, it can be difficult to detect issues before they effect fulfillment and customer experience.

Exception management focuses resources on the areas with the greatest potential impact on operations or the customer experience. This allows teams to prioritize inventory shortages, replenishment delays, fulfillment bottlenecks or demand spikes before they become larger problems.

Of course, there are always exceptions. For retailers, that could be a fast-selling product that risks going out of stock. For a high-value goods brand, slower-than-expected inventory movement may increase carrying costs and inventory exposure.

However, a well-defined exception management process allows SMBs to spend less time monitoring routine activities and more time addressing situations that require action.

How Can Demand Signal Management Improves the Bottom Line?

Demand signal management enables retailers and high-value brands to make better inventory decisions, but the benefits extend beyond inventory planning.

• Better visibility improves inventory efficiency. Positioning inventory more effectively helps reduce the likelihood of stockouts and overstocks. Many organizations pair demand signal management with lean inventory management strategies to balance inventory availability with inventory efficiency.
• Demand signal management can also support a stronger customer experience. Products are more likely to be available when and where customers expect them. As fulfillment options continue to evolve, aligning inventory decisions with customer demands becomes even more important.
• Demand signal management can help organizations make more informed decisions throughout the supply chain. Teams can proactively identify changes earlier and respond more quickly and with greater precision, rather than reacting after a disruption occurs. Over time, this can lead to reduced costs, improved inventory performance and support for long-term growth and profitability.

Combining demand signals, predictive analytics and responsive replenishment strategies helps SMBs adapt as conditions change, without sacrificing the service levels customers expect. Customer expectations will continue to evolve, and as they do, demand planning will remain central to balancing inventory performance, brand experience and long-term growth.

¹ The State of Commerce Ops 2025, Linnworks, March 2025.

* “UPS State of Logistics Technology” survey was distributed in an online format to 1,006 respondents in the U.S., with each being compensated at an agreed-upon rate for their time. Each survey took approximately 10 minutes to complete. Our survey ran from March 25, 2026, to April 16, 2026. QUESTIONS: Retail: Which of the following digital initiatives are priorities for your organization in the next 24 months?

Individual results and options will vary. UPS makes no promises of any specific outcome in this document but instead provides only example outcomes based on certain UPS customer experiences.