Demand forecasting, a time travel machine for retail world. It is claimed to have capabilities to predict short or long term demands to give businesses and companies a head start in the race. But what exactly is demand forecasting?
In simple words, it means making estimates about the demands that future customers might make. It uses an amalgam of historical data and other information and combines it all with well-designed algorithms to give businesses the most accurate result possible. A well-done demand forecast can help companies and businesses get valuable information about their current market. This prepares them in terms of stocks, sales and also warns them about any potential losses.
A few benefits of demand forecasting are:
- Demand forecasting allows businesses to optimize their inventory more effectively and inturn, increase their inventory turnover rates.
- It allows provides insights and estimations about the upcoming cash flow. This allows businesses to accurately budget their resources to pay suppliers and manage other operational costs.
- With demand forecasting, businesses have a more precise idea about staff requirement.
With continuous innovation and betterment of technology, new and better techniques are being added to the bag of demand forecasting. Apart from internal and historical data, external factors like weather patterns, recent sales materic and consumer spending power and employment are also considered while predicting sales. With all this together, demand forecasting helps businesses take a right turn and also prepares them for it.
But sometimes businesses lack the essential data required for forecasting. This might be because the business is new or forecasting for a new product is required. In a situation like this, other information factors like expert opinions, comparative analysis and market research are used. This gives business owners a good quantitative estimate about the upcoming demand.
So new or old, demand forecasting is an essential and a solution for every business and company.
However, it is not a one time process. Companies and businesses should continuously keep an eye on their business so that no crucial piece of information is side-lined. Today there are a number of real-time demand forecasting softwares available. These softwares use key sales and inventory data to recognize patterns and make future predictions.
Demand forecasting can make your business a fairytale, promising you the happy ending you deserve. But it is hard to believe in a fairytale while facing harsh competition of the business world. To support this fairytale, here is a demand forecasting use case:
A major global alcohol brand (name hidden due to privacy reasons) needed to predict their upcoming sales to smartly plan production of their key product line. So far, the company relied on past data alone. This method often resulted in overproduction of their product as a safety net. Where on the one hand it saved their customers from buying the competitor brand, on the other hand overproduction meant wastage of resources and storage capacity. With proper demand forecasting in place which was carried out on a weekly basis, the company could make better staffing, purchase and production decisions. As a result, the company saved a heavy amount of $9 million per year just by avoiding over-production.
No matter how small or big, every business and company is the fast changing demands of the market. And the one that prepares well becomes the winner. Demand forecasting becomes coach which drives and guides businesses toward the trophy.