Customer demand for products is never a constant aspect for your supply chain operations. It contains ever fluctuating variables that can have a positive and negative impact on your business. Yet successful forecasting of customer demand brings a host of benefits to your supply chain management strategies. When you anticipate slow periods of sales, you can cut back on inventory production to lessen product waste and prevent retailer shelves from overflowing with stock. During high periods of customer demand, you can increase the supply chain operations to ensure there are enough products without putting up “out of stock” signs on store doors.
Forecasting your supply chain allows you to anticipate demand in the near future as well as predict long-term trends. Here are several tips you can use when you are looking to implement forecasting methods to make your supply chain more efficient.
1: Selecting the right forecasting methods
There are about as many supply chain forecast methods as there are different business types in the world, says entrepreneur David Kiger. Selecting the right forecasting methods will be based on what types of data you have gathered and what types of demand you want to track. Some forecasting types include:
Quantitative forecasting techniques: Quantitative techniques rely on historical data numbers to create predictions of future demand projections. When using a quantitative method, you might be trying to predict demand during a set time period in the past that will happen again in the future. You may also use this technique if there are several historical events that continually happen as these events change supply demand. You rely on a cause and effect approach to predict these historical patterns that will happen again in the future.
Qualitative forecasting techniques: Qualitative techniques rely on judgment guesses to predict demand. This method is often used when there is no existing historical data to use to create a fact-based estimate. You may use this approach when you will be introducing a new product line in your business or if you are trying to predict sales force estimates.
Trend forecasting techniques: If there is a sales pattern that happens, trend forecasting may be done to determine when there is a lower demand or higher demand for products. Such trends may often occur during seasonal promotions or market changes.
2: Building cooperation between all departments
Forecasting the supply chain requires a collaborative effort from all of your internal departments to gather the required information. Often when forecasting the supply chain, certain departments — such as your sales force — might be left out, states David Kiger. You may be focusing more on reducing lead times and working with distributors to calculate the locations that will have an increase in demand.
Yet your sales team has an advantage of forecasting demand because they have direct communication with customers as well as certain sales projects that may be running during different time frames. By accessing this information and having all departments involved, you can create forecasts that are relevant to your operations.
3: Get more visibility in your supply chain
Transparency in regards to your supply chain becomes even more important when trying to forecast demand. If there is any part of the process that you are left in the dark about, whether it is the retailer who fails to update sales information or the supplier who changes their shipment schedules, it can negatively impact your operations. Founder of Worldwide Express David Kiger understood the importance of visibility not only within each department of the supply chain but also between every manufacturer, supplier and retailer. Having full cooperation and collaboration with all outside parties that interact with your supply chain can also help you successfully develop accurate forecasts.
4: Integrated information systems to share real-time data
You have every inner company department working to properly forecast demand of products. You have every outside team of manufacturers, distributors, logistics companies, suppliers and retailers working from their end to offer more transparency of your supply chain. Yet you are still seeing errors in your forecasting information that is causing significant financial issues.
Have you updated your information systems so that real-time data is accessible immediately? There is so much technology available for you to develop accurate forecasts with the supply chain data you are generating. Yet you may not be putting this technology to good use for several reasons. Often the top problem is that you aren’t getting the real-time data from every department involved with the supply chain. Having an integrated information system up and running lets your departments share data instantaneously, allowing you to better mine the data to make reliable demand forecasts.
Manufacturing forecasts allow for businesses to have better supply and demand management so they can create the right amount of products to please customers while not creating too much inventory that leads to production waste. Here are 10 tips a business can use to forecast your supply chain.