Is your business affected by unpredictable market conditions? Planning ahead prevents inventory issues. These fluctuations can sometimes be caused by your competitor experimenting with new discounts, or the market alternating according to the latest customer bias. These factors can affect your sales plan and lead to economic loss. Forecasting projected demand is one of the solutions to overcome these market challenges. Demand planning and forecasting software helps you to make informed decisions for your business. Demand planning and forecasting software allows your business to improve and comprehend the demand of your customers.
Maintaining supply and demand is a challenging task for various businesses throughout the globe. Demand planning and forecasting software predicts your future sales and enhances your inventory profitability. You can stay confident in your supply chain execution if you are using the right software solution to forecast demand. Let us delve deeper into the specifics of demand forecasting software, HR Demand Forecasting and the techniques used in HR planning.
What is Demand Forecasting Software? Demand forecasting is the process of projecting future customer demand based on past data, relevant business reports, and other controllable and uncontrollable factors to produce short-term and long-term estimates of future demand. Factors like developments, product launches, offers, and retailing significance impact future demand projections. Demand forecasting software is used to predict user demand and make proper arrangements to manage the supply chain. Using demand forecasting software, your company can predict future sales based on your historical demand data such as sales history, purchase history, etc. to make informed business decisions. Demand forecasting software operates as the leading decision-making tool for directors to determine products' prices, understand the market potential, and execute business growth plans.
HR Demand Forecasting Human resources are the most valuable asset a company holds. Human resource planning is a method used to predict future HR demand. This forecasting, generally utilizes past sales data to estimate future staffing needs more accurately. HR forecasting starts with delivering comprehensive job reports and estimating employee output levels. Factoring in the labor market and labor supply helps with both human resource planning and resource management optimization. There are various methods in which businesses can forecast their demand. All forecasting models leverage data and analytics over specific periods. For instance, you can predict the market on the macro-level (e.g., economic conditions, external forces, and other broad things disrupting commerce) or micro-level (e.g., a particular industry, business, or customer segment). You can also determine future demand by short-term or long-term, depending on how you'll use the data.
Demand Forecasting Techniques in HR Planning While some manufacturers prefer a particular demand forecasting technique, other businesses may collaboratively use various forecasting techniques. So, how to do demand planning and forecasting? Despite of which forecasting process you use; human resource management professionals must consider their expertise and intuition. There is a broad category of demand forecasting techniques used for human resource planning. Standard forecasting techniques used to estimate HR demand involve the following:
1. Managerial analysis: The organizational analysis technique includes the bottom-up approach as well as the top-down approach. In the bottom-up approach, industry managers’ report human resource demand to top management. Utilizing the information received directly from their line managers, top management forecasts human resource requirements accordingly. The bottom-up approach's result is a demand forecasting process that includes input from various departments.
In the top-down approach of the managerial analysis technique, top management establishes the demand forecasting method. After the HR forecasting is complete, top management assigns the forecast to departments to analyze and accept. A sequence of the top-down and bottom-up approach is referred to as the participative approach. The participative process allows department heads and top management experts to forecast human resource demand collectively. The participative approach is a HR planning forecasting technique that encourages collaboration while reducing communication gaps. For this reason, the participative process is usually preferable to the top-down and bottom-up approaches.
2. Regression Analysis: Regression analysis is a statistical method is used to distinguish trends included within data. Recognizing trends helps business experts understand their human resource requirements better and optimize the available labor supply. Regression analysis examines the relationship between a predictor and a target, also known as independent and dependent variables. The dependent variable includes circumstances that businesses are trying to predict or gain additional insight about. In contrast, the independent variable has events that may or may not affect the dependent variable. Keep in mind that independent variables never predict dependent variables with absolute accuracy.
3. Trend Analysis: Trend analysis involves consolidating and estimating data to recognize patterns of data that might impact the future. By examining the past trends, the HR department can foretell the effect of the same action on the organization's future because it is assumed that these patterns will remain constant. A forecasting method that takes past trends and ratios in employee movement is stable and indicates future trends and employee movement rates which is one of the simplest ways of forecasting future HR supply.
For example, an organization analyzing historical data may realize that nearly six percent of their staff retire every year, five percent resign, and three percent are dismissed. Using trend analysis, future HR supply forecasts can be established by calculating an average decrease in internal HR supply of 14 percent per year.
4. Statistical Forecasting: Statistical forecasting in demand planning leverages past-historical data to produce supply chain projections using several advanced statistical algorithms. In demand planning, it is necessary to have data-backed predictions to avoid stock-outs, stock overflow and keep the customers satisfied. There are many features to how statistical forecasting makes demand planning more productive. Demand planners can be analyzed using profound algorithms and determine which forecast is most accurate by evaluating each model's accuracy estimates. Then select the best model for each product concerning the location, type, etc.
When forecasting is part of the equation, it becomes easier to customize prediction algorithm assumptions and measure accuracy with techniques like mean absolute percentage error. With statistical forecasting, demand planners can promptly identify outliers and rejections based on user-defined parameters, including standard divergence or the interquartile range. Seasonality has a significant influence on demand planning. Retailers have several determinants to distribute through to ensure that they are prepared for different seasonal events. Will they be available during the holiday shopping rush? What if weather patterns change and all those raincoats they have stocked aren't purchased? With statistical forecasting in demand planning, these problems are easy to answer because multiple statistical simulations can be executed, including models to gauge the impact of seasonal demand, multi-linear regression forecast quantity, price, discounts, and more.
Takeaways Human resources can be a business's most valuable asset. HR forecasting uses historical data to estimate the human resource requirements that will be needed in the future more accurately. There are many HR forecasting techniques available in the market which follow the methods mentioned above. Regardless of which forecasting procedure to use, HR experts should always consider their experience and analyze things accordingly.
Avercast is an industry leader, tailor-made forecasting available to empower you to understand effectively, predict & plan your business demand along with your inventory replenishment requirements. Over the last few decades, we have delivered the best demand planning software for all kinds of businesses. If you are looking for demand forecasting in supply chain solutions for your business, to understand customer demand, connect with an expert at Avercast today!