What is the need assessment important for?
The need for market performance is an important piece of information
- for planning investments and capacities
- and for the control of operational processes.
The assessment of needs therefore plays a central role in the management of companies.
Methods and procedures for determining requirements
Identification of long-term needs for corporate orientation
In order to determine the long-term market need for a service, market research methods are appropriate. In particular, a direct personal or media customer survey is recommended. Even better, however, is the active involvement of lead customers in the long-term planning process. Looking at the activities of competitors can also provide valuable insights. Also look at companies that are indirect competitors.
Example: A company produces pipes made of polyethylene. In order to identify market and demand developments, it is worth taking a look at manufacturers of pipes made of other plastics, e. g. Polypropylene; but also a look at steel pipe manufacturers can be worthwhile.
Determination of immediate customer requirements for the operational business
There are several methods for determining the immediate needs for the operational business. Reliable statements are to be expected when customers are involved in the needs assessment.
Order-driven needs assessment
In many companies an order-driven assessment of requirements prevails. By means of an order-driven demand assessment, all orders in the company can be planned. However, the view beyond the order backlog is missing. If further orders are placed, they have to be put in the back – even if they are urgent – or they interfere with the planned operation. Therefore, a purely order-driven demand assessment is not the best choice.
Deterministic or program-oriented needs assessment
A deterministic demand assessment calculates the demand from the sales plans of the company. Thus, deterministic demand planning relies on an accurate sales planning of sales. There remains a potential for uncertainty between sales planning and real market demand.
Stochastic needs assessment
A stochastic needs assessment can be used if certain trends are known. For example, known seasonal sales of demand development or known fundamental market developments can be used as a basis for demand development. Historical data provide indications of future needs.
Heuristic needs assessment
The heuristic development of needs is fed by expert assessments of future needs. It is based both on experience and on insights into future market developments. These assessments also include knowledge of special effects such as tax breaks that may lead to additional needs or cyclical downturns that suggest lower needs. Other information, such as knowledge of conducted marketing campaigns, also flows into the heuristic needs assessment.
Consumption-oriented needs assessment
A consumption-oriented demand assessment makes sense for standard items that are sold out of stock. In these cases, production planning can be carried out on a demand-driven basis.
This is how you can determine your needs
In practice, a combination of different methods is suitable for determining requirements. The needs assessment should incorporate both contract-oriented and program-oriented approaches as well as historical developments and expert judgements. The ongoing coordination is a demanding task.