In demand forecasting, you predict the demand for your product or services so that you can deliver it more efficiently. This is not only satisfactory for the customers but it drives much of the supply chain planning. Most business owners may feel a little lost when it comes to demand forecasting. It is a complicated issue, but fortunately, there are systems that can help you. Here is why you need to keep demand forecasting at the forefront of your mind.
What’s the Worst That Could Happen?
You may be wondering, how bad can a demand planning error be? What are the worst-case scenarios or consequences that you might face? If you want a major example of demand forecasting errors that led to extreme loss, you can look at a Walgreens case. Walgreens lost 1 billion dollars and two executives due to the error. The right forecasting system is crucial to a business’s earnings.
How Essential Is the Process?
In terms of the supply chain, demand forecasting is crucial. Every decision should revolve around demand forecasting. On one hand, it is a difficult part of the supply chain plan, but it is also one of the most important. In demand planning, you use past sales data to estimate customer demand. There are a lot of different factors that could make a prediction off. However, you want to try to predict it as close as possible.
Solid demand forecasting allows you to plan your budget, your orders, your marketing and so much more. If you have the right prediction, you can utilize your resources much better and have your inventory at the desired level.
Without supply-focused planning, you cannot identify patterns of demand, you can’t prepare any response models to deal with demand. Fortunately, there are programs and systems available that can help business owners understand their analytics. With the right tools, you can make the most out of your demand forecasting.