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Demand management is a planning methodology used to manage and forecast the demand of products and services.
Demand management in economics
Demand management at the macroeconomic level involves the use of discretionary policy and is inspired by Keynesian economics, though today elements of it are part of the economic mainstream. The underlying idea is for the government to use tools like interest rates, taxation, and public expenditure to change key economic decisions like consumption, investment, the balance of trade, and public sector borrowing resulting in an 'evening out' of the business cycle. Demand management was widely adopted in the 1950s to 1970s, and was for a time successful. However, it did not prevent the stagflation of the 1970s, which is considered to have been precipitated by the supply shock caused by the 1973 oil crisis.
Theoretical criticisms of demand management are that it relies on a long-run Phillips Curve for which there is no evidence, and that it produces dynamic inconsistency and can therefore be non-credible.
Today, most governments relatively limit interventions in demand management to tackling short-term crises, and rely on policies like independent central banks and fiscal policy rules to prevent long-run economic disruption.
Natural resources and environment
In natural resources management and environmental policy more generally, demand management refers to policies to control consumer demand for environmentally sensitive or harmful goods such as water and energy. Within manufacturing firms the term is used to describe the activities of demand forecasting, planning, and order fulfillment. In the environmental context demand management is increasingly taken seriously to reduce the economy's throughput of scarce resources for which market pricing does not reflect true costs. Examples include metering of municipal water, and carbon taxes on gasoline.
In economics the term is also used to refer to management of the distribution of, and access to, goods and services on the basis of needs. An example is social security and welfare services. Rather than increasing budgets for these things, governments may develop policies that allocate existing resources according to a hierarchy of needs.
Demand management in business
In business, the term is used to describe the proactive management of work initiatives (demand) with business constraints (supply).
Demand management in IT
IT / IS demand managers seek to understand in advance how to best meet the needs and expectations of customers, clients, partners, and enablers.
Thus, proper forecast and sizing of demand is required in order to deliver a stable and effective technology environment.
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