In today's growing digital world, an effective, performing supply chain has become a vital part of a successful business. Yet, some organizations face various challenges to meet their customer service expectations. This is what an underperforming supply chain leads to. It results from an ineffective planning processes, low forecasting accuracy, and a production power delay in responding to market requirements.
These ineffective planning types may hamper your business’s growth and lead toward some significant drawbacks such as loss of sales, dissatisfied customers, and more. Because of this, the financial status of your company can decline and revenue that could have been generated is lost. The best practice to reduce these damaging effects is to plan ahead for the proper demand.
Demand forecasting software makes use of algorithms to predict future customer demand. It studies consumer trends to produce a forecast of how much inventory you will sell in the upcoming sales periods. This type of information allows your organization to keep the right amount of stock on hand - to fulfill the customer requirements. You will notice that in using this method, not much time, effort, or capital are wasted on managing your inventory.
How does Demand Forecasting contribute to a successful business? Demand forecasting (knowing what the upcoming demand will be) allows an organization to make business decisions such as managing funds, planning the production cycle, purchasing raw materials, analyzing product pricing, and more. Listed below are some key advantages of demand forecasting software which help businesses to perform at a top-notch level:
Financial projections: Demand forecasting plays a vital role in preparing the budget by estimating the expected costs and projected earnings. As a result, demand forecasting allows organizations to plan their budget for other business operations within the company.
Improved customer satisfaction: To give customers what they want, you need to listen to them. The only way to keep them happy is by providing them the product they want. Hence, demand forecasting will help in predicting the product demand so that customers never have to go without the product they want.
Reducing the safety stock requirements: With an organized demand forecasting process, there will be an immediate impact in the planning of inventory levels -
• Naive approach forecasting
• Forecast for seasonal variations in demand
• Preparation for promotional activities
• Develop new inventory and prepare for its launch
Using forecasting to plan any of the above scenarios does not require maintaining safety stocks to manage such events. Less inventory would mean that organizations are likely to sell a stock before it reaches its expiry date or is discarded due to some damage.
Development of organizations: Demand forecasting helps in making decisions about the development of a business. It depends on the expected demand; if the need for certain products is higher, the organization may extend further. And again, if the demand for products is expected to fall, the organization may cut down its investment.
Major Roles of Demand Forecasting in Supply Chain Management
Business Strategic Planning: Forecasting is vital for strategic business activities like budgeting, mitigation, risk inspection, financial planning, etc. Critical business predictions such as profit margins, finance expenditures, turnovers, etc. are also dependent on forecasting.
Creating push-processes of Supply Chain: Forecasting starts with all push-processes of the Supply Chain such as inbound logistics, manufacturing, raw material planning, and purchasing. Hence, accurate forecasts help in optimizing inventory levels and capacity usage.
Operating all pull-processes of Supply Chain: Forecasting uses all pull-processes of the Supply Chain such as management, packing, shipping, and all the necessary logistics. Accurate forecasts enhance logistics and distribution and increase the level of customer satisfaction.
Why use Demand Forecasting Software?
Demand forecasting lowers the risk related to business activities and helps in making efficient decisions. Good forecasting brought about by great forecasting software helps an organization in creating future business goals. It also helps in process selection, production planning, facility layout planning, inventory management, capacity planning, and more.
Avercast Demand Forecasting Software comes with an industry-leading 208 forecasting algorithms. These algorithms can predict and identify 208 unique demand patterns. Every time you run a forecast using Avercast Business Forecasting, you receive 208 opportunities to identify, apply, and project the proper demand pattern for every SKU.