Traditionally demand forecasting has been a relatively manual affair, leading to the common misconception that it’s complicated and not worth the time or money investment. Today, this couldn’t be further from the truth – inventory management software becomes more affordable and comprehensive for businesses of all sizes.
Inputs used when forecasting demand
Businesses using inventory management software have access to a large range of data to create demand forecasts. To ensure an accurate forecast, data should include a mix of historical data and current demand conditions. Inputs could include historical sales data, market seasonality, future sales orders, current market conditions and other factors. Longer term forecasts may give more importance to historical data when creating a forecast as shorter term forecasts are often more influenced by current market conditions.
Scalability of demand forecasting
We mentioned earlier that there is the misconception that demand forecasting is only for the big producers in the manufacturing world. This isn’t true in the technologically advanced age we live in; online inventory management software makes it easy for businesses of all sizes to use demand forecasting to maximise their manufacturing capacity.
Demand forecasting can occur at all levels of business including at an industry level such as trade associations, at a manufacturing level with individual companies forecasting demand or at specific product levels. Manufacturers should use all types of demand forecasting to ensure they understand upcoming factors affecting inventory management.
Getting the inventory manufacturing mix right
Maximising profits is one of the goals of any successful business. Businesses using demand forecasting can use the forecasts to ensure they get the amounts of each product in their range being manufactured correct throughout the year. This results in the best use of limited manufacturing resources and raw goods along with reducing the amount of stock wasted or sold at a lower price. In the example above of a brewery, this may be ensuring the best brewery inventory stock mix at times of the year when certain beers sell better than others. Their data may show that certain beers sell better than others depending on the season so they need to increase manufacturing in advance to ensure a consistent supply.
Effective demand forecasting isn’t complicated or expensive if a business has an idea of the best data inputs and the inventory management software to process and understand the data.