Demand forecasting is the first step toward planning future business operations. It is the science of forecasting future demand trends with the help of advanced analytics of historical sales data, real-time sales data, and other factors such as weather, market conditions, and consumer emotions. The entire supply chain management is aided by demand predictions, as only with an accurate data analysis is it possible to plan all the other aspects of the supply chain, such as production planning., raw material procurement, warehousing, and logistics.
The data sources such as business insights, sales history, seasonal occasions, supplier lead time, and market research data are used to get accurate forecasts. Understanding what a reasonable forecast is can be a big factor contributing to the success of your business’s success. Forecasting demand can be challenging as there is a high rate of error, so it is essential for planners to ensure that the forecast they have received is of the best accuracy. Even the slightest error in demand forecast may lead to big losses for a business. Organizations use demand forecasting to optimize their inventory and other components to ensure the best accuracy and productivity.
What Are the Best Practices for Demand Forecasting?
To make sure that the planning for business operations is accurate and productive, it is essential for the planners to ensure that best practices are followed for demand forecasting. Here we will discuss some of the best demand forecasting practices for a business.
Businesses need to adopt a repeatable procedure that they can use to evaluate past forecasts and compare them with actual market results. This helps in making essential changes in the forecast model to enhance accuracy. Planners require information about whether past predictions are inaccurate or accurate, along with the state of the market. This will help determine the reasons for the model’s accuracy and hence provide the scope to improve.
Accurate Real-Time Data
One of the most disastrous things that you can do is formulate a demand planning strategy using wrong or inaccurate data. The accuracy of demand forecast is as accurate as your data. Hence, ensuring that the sources from which you procure your data are reliable and accurate is essential. You also need to verify the calculations that you perform before taking any further actions.
If your data lacks accuracy, it is impossible to predict demand to any degree of accuracy. You need to integrate the data you gather from every sales channel and then verify its accuracy. The best way to monitor the data health of your company is to use an enterprise data management software solution that captures and structures the data in real-time and ensures the accuracy of data.
Use Intelligent Demand Forecasting Software Tools
Artificial intelligence and machine learning are two revolutionary technologies that are making planning solutions more agile and self-reliant. You need to look for intelligent tools that can help you in your business’s demand planning, as modern-day technologies have the potential can fundamentally change the way you look at supply chain management. These tools are adaptable and can learn independently to improve their ability to provide more accurate future demand predictions.
Keeping an Eye on Macroeconomic Trends
It is easy to miss the market and macroeconomic trends, but it can cost your business a lot. Ignoring current trends while predicting future demand can result in an accurate forecast and planning. Also, not considering the current economic trends can lead to disruptions in your supply chain.
Determine what to measure
In your business, you can measure almost anything. It is essential to determine the factors that impact future demand and the accuracy of your demand forecast. Measuring the wrong factor may yield only the desired results from the entire forecasting process. Some data points you may consider measuring include orders, frequency of stockouts, POS data, Competitor sales data, and shipments.
How Can 3SC Help You Apply the Best Practices of Demand Forecasting?
3SC’s adaptable Demand Planning solutions can help you adapt these best demand forecasting practices by helping you create a repeatable process, capture real-time data, and provide real-time accurate advanced analytics so that you can demand better for a successful business.