Demand Forecasting: The Ultimate Secret for Your Organization’s Success
“I am like any other man. All I do is supply a demand.” – Al Capone.
Al Capone understood that the secret to making money was simply giving people what they wanted. That’s it. Demand Forecasting is all about that one simple thing—figuring out what your customers want so that you will have products in place to fulfill their demands—the right products in the right place at the right time. It’s the key to overcoming challenges and feeling empowered in your business decisions.
For Capone, this task was made easy by Prohibition, which eliminated an end-to-end supply chain: the legitimate producers, wholesale distributors, and retail sellers of alcohol. They all went away, creating a large scarcity of products. There was a severe supply void for the end consumer’s demand, one that Capone’s organization was more than happy to fill.
Today’s retailers operate in a highly competitive market, far removed from the unique circumstances of Capone’s era. However, they are increasingly recognizing the need for advanced technology, such as sophisticated algorithms and machine learning, to enhance their demand forecasting and supply chain performance.
Demand Forecasting is Much More Than a Sales History Review
Many forecasting and replenishment systems rely heavily on past sales data to predict future consumer demand. However, this approach is not without its flaws. It often leads to ‘dirty data, ‘which is inaccurate or incomplete information that can compromise the accuracy of the forecast.
Learn how to find where dirty data is impacting replenishment and breaking your planning and sales processes apart. Read: Critical Steps to Forecasting Replenishment for Demand Planning
Sales histories in raw form tend to include information that can skew the accurate picture of market demand. For example, a week of poor weather in the first quarter may have affected sales, which could be interpreted as weak consumer demand. Also, a two-week promotion which doubles sales in the next quarter could increase sales history. Demand forecasting software considers events such as promotions, lost sales, markdowns, cleaning up dirty data, and factors in sales anomalies such as weather events. The result is data that more accurately forecasts actual demand, allowing for a more efficient – and profitable – inventory replenishment methodology.
Sales History Can’t Help You with New Product Forecasting
Yet, demand forecasting can. New products are the lifeblood of most businesses. Still, for many supply chain executives, the forecasting process can seem as mysterious and mythical as using a dowsing rod to find water. That is where demand forecasting software comes in with sophisticated algorithms that can examine and refine demand history data to help you anticipate your customer demand. It may seem like magic, but it is not. Instead, it is based on the best that new technology offers. Additionally, a retailer can use special forecasting methods and tools such as block history, freeze forecast, and pattern after, allowing you to get an accurate picture of demand for your new product introductions.
Demand Forecasting is Crucial to your Demand Driven Strategy
Whether your focus is improving the efficiency of your supply chain for existing product lines or evaluating new products to bring to market, demand forecasting is crucial to making your demand-driven strategy work. The performance gaps caused by increased new product launches, changing promotional strategies, and the ability to reliably forecast across multiple channels need to be closed to improve performance.
With rapidly changing consumer habits in today’s retail marketplace, demand forecasting continues to grow in importance, making it even more critical than ever for companies to change.
Contact us for more information on demand forecasting and creating a demand-driven strategy that can work for your business. We can help you transform your company into a demand-driven retailer or wholesaler ready for success in today’s market.
Contact us., we can help you Tighten the Links in Your Supply Chain.
Copyright © Data Profits, Inc. 2014 All Rights Reserved.
Stuart graduated from Auburn University, with bachelor of science in business administration.
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