Product demand waxes and wanes based on the pain points of the customers. Knowing when customer demand will rise or fall can allow you to better manage your supply chain productivity so you have a greater control of product costs and distribution channels.
Forecasting allows you to determine your customers’ future purchasing behaviors using different types of methodologies and analysis of data, claims business leader and entrepreneur David Kiger. You can figure out certain buying trends that will happen in the near future that will have an impact on inventory levels and operational processes so you can develop the right strategies to implement at certain time periods.
Benefits of Forecasting
Forecasting is not a perfect science. It relies on judgments and historical data to create a scenario that has the greatest chance of coming to pass. Yet if you take into account the possibility of forecasting errors occurring, you can reap in several different types of benefits with forecasting your supply chain. All areas of the supply chain, from the manufacturing stage to the distribution of products to end users, can be used in your forecasting methods.
The types of forecasting strategies to use will be based on your operations and what types of historical data, if any, are available. Quantitative forecasting, trend forecasting, and qualitative forecasting are all methods that can be deployed. You may select one method or several different forecasting types into your business strategies and objectives to gain the following benefits.
Meeting Increased Product Demand
Forecasting customer purchasing trends can allow you to determine when to increase production processes to meet high demand so warehouses do not run out of available stock. You have the opportunity to change distribution channels to satisfy peak times so store shelves can offer available products as you edge out the competition.
When you have several manufacturing plants located across the country, you can know which areas to ramp up productions to meet store fulfillment levels. This method allows you to properly manage distribution and transportation expenses to create more cost savings toward your supply chain.
Decreasing Inventory Waste
One of the biggest and costliest problems that supply chains face is creating excess products. When customer demand wanes, products take valuable storage space in warehouses and store shelves. With forecasting processes, you have better control of your inventory levels.
In reality, excess inventory shows an out-of-control supply chain management process, states David Kiger. You are wasting more than raw materials. You are wasting production operations, workers, and money. In time, you will have to redirect your resources into moving products out of warehouses into other storage facilities, or gathering products from retailers when the old products become obsolete.
Streamlining Inventory Management Systems and Data Collection
Forecasting also has other benefits that involve the gathering and sharing of real-time data for better operations. Inventory management systems in every supply chain department allows the collection, analyzing and sharing of data to lessen forecasting errors and improve logistics capabilities. You have more visibility and transparency throughout the supply chain with your suppliers, manufacturers, distributors and retailers for better management processes. You have the ability to lessen transportation delays and better plan processes for greater control of inventory.
One thing to keep in mind is that every department can help with the data collection. Think about your sales team, remarks David Kiger. They are in direct connection with your current customers. They can gather important information about what customers want and need, letting you forecast future buying trends and modify your processes accordingly. This planning allows you to increase customer satisfaction and retention so you can bring in more revenue.
The Benefits of Forecasting are There for the Taking
There are few doubts that forecasting your supply chain can bring a range of different benefits based on the type of company operations you have. Forecasting can be done with well-established companies as well as new businesses even when there is no current historical data to use. You simply must adjust the type of forecasting methods to one that best suits the data you are collecting and the visibility you have in your supply chain process.
Companies who have been able to create reliable forecasting predictions have seen a reduction in inventory waste, an increase in production capabilities, and an overall cost savings throughout the supply chain. Yet it requires dedication and trust in your forecasting calculations, collaboration with all departments involved in the supply chain, and using the gathered data in the correct manner that ensures greater accuracy of historical trends.
Supply chain management techniques rely on a number of forecasting methods to have greater control of their inventory production and to estimate future demand of products. When supply chain forecasts are accurate, you can see better management of resources and the financial health of the company.