Master the Art of Demand Forecasting. In today’s economy, companies rely on demand forecasting to make better decisions regarding their inventory of products. Demand forecasting is also about predicting when a store will run out of its stock and need to replenish it. This article provides several tips to help your organization succeed in demand forecasting.
1. Gathering Data in The Correct Format
Forecasting tools require that you input your data in a specific manner to be compatible with the program. If you manually create your forecast, make sure you adequately format it with the correct headings and columns. Suppose you use Excel or another spreadsheet software application to create your projections. In that case, it will automatically number your columns starting from A and going to the right alphabetically down to Z. You can use the A column to enter your dates, the B column can incorporate your production information, and the C column for determining how much stock is on hand. The last column will contain your demand prediction information.
2. Be Positive
You can base your forecast on what your company expects instead of thinking about the worst that can happen. The best way to ensure this is to work closely with your sales and marketing department when preparing your forecast. These departments will better understand what you should expect due to their knowledge of customers’ buying habits. If sales and marketing do not agree with production, inventory may be sitting in the warehouses due to poor forecasting.
3. Make Changes to Your Forecast
If you find that your forecast is significantly different from what you anticipated, it is good to make changes to it. It will allow you to reschedule some of your manufacturing or production schedules to allow for increased demand or new product releases. It would be best if you were also sure to work with your accounting department so that they consider forecast cost when calculating inventory.
4. Use the Forecasting Software Provided by Your Company
Many companies will provide demand planning software free of charge for their employees. It is an excellent tool because it includes some commonly used tools in professional demand forecasting. However, if your company does not provide this software, you may be able to find an application that does a similar job. These applications will give you access to some of the same tools and allow you to forecast more effectively.
5. Be Ready to Make a Forecast
If you are not prepared to make a forecast, you should find out why. One of the reasons that people delay making forecasts is because they believe there is too much uncertainty in the future. If your company has a reliable forecasting methodology, it will be easier to develop your forecast when needed. However, if you do not know what to expect in the future, you might need to create a new model or look at different variables that might affect demand.
6. Look at Other Industries
Suppose your company has another business that is similar to yours. In that case, you may find some data to help you better forecast. For example, some organizations will use the same historical data to build their demand forecast. The larger the company, the easier it is to gather this information because they have records dating back several decades or more. You can also look at what your competitors in your market are doing or how they are forecasting demand based on business trends and seasonal patterns.
7. Consider Your Past Data
Your forecast should always look at data similar to what you experienced in the past. If you notice that your inventory levels always rise during the summer months and fall during the winter, you may want to consider this when making your forecast. You can also use information from previous years’ forecasts and adjust it based on newer data that you have gathered. It will help you build more realistic projections by considering changes in your supply chain and environment.
It would be best to use these tips to succeed in forecasting demand. If your forecast goes off track, have it reviewed or have another person check it for continuity. If you are using a software package, audit the information to ensure it is adding up correctly. Also, take the time to look at what your peers and competitors are doing. It will help you get a good handle on how demand can be affected by outside factors and unpredictable changes in the economy.