The Importance of Demand Forecasting in Supply Chain Management

Understanding Demand Forecasting

Demand forecasting is an essential component of any highly efficient supply chain management system. If done properly, it can make a huge difference to your business’s operations, leading to significant cost savings and growth opportunities.

But what exactly is the role of demand forecasting in supply chains? Demand forecasting refers to the process of planning and predicting product demand o keep a company as efficient and profitable as possible.

In fact, without a strong demand forecasting process in place, you might end up wasting materials (and money) by producing more than you are likely to sell. On the flip side, you might be losing revenue opportunities because you have not been able to anticipate high demand and customer preferences.

In an increasingly competitive market, demand forecasting can provide you with an ace up your sleeve. By predicting customer requests, you can inform and organise core processes across the supply chain to ensure your operations run as smoothly and seamlessly as possible.

Demand Planning and Forecasting Concepts 

Again, the aim of demand planning and forecasting is to predict future customer requests. This helps you prepare for any potential increase in demand or a shift in trends and client behaviour.

Businesses with a solid demand forecasting process use historical data, statistical models, and market analysis to predict people’s desires in the short and long term. This can give you a clearer idea of what to expect in the coming weeks and months.

The role of demand planning, specifically, is to align inventory levels and production levels based on the information acquired. With all the info at hand, you can organise your supply chain effectively, prevent issues and delays, and keep your clients happy all year round.

Demand Forecasting Tools

Software

Unsurprisingly, modern demand forecasting relies significantly on technology, using advanced demand planning software with clever algorithms and data analytics.

These are designed to sift through large amounts of data, identify customer trends, and generate accurate predictions to help companies prepare their supply chain stages accordingly.

Some of the main tools used by businesses for their demand forecasting process include:

• AI and machine learning
• Big data analytics
• Cloud-based software
• Simulation and scenario planning tools

Inventory Forecasting 

Some tech tools and software are focused especially on predicting future inventory needs, with the aim of minimising the risk of stockouts and maximising profits.

If you find that demand is increasing and need additional storage space for your products, shipping containers can be a valuable solution.

As well as being sturdy and having a long lifespan, cargo units are very versatile and flexible, meaning you can customise them as needed and even move them from one area to another. If you expect high demand to persist over time, you can buy a container outright – but if you are unsure of how long a specific trend will last, you can hire a unit instead and return it when you longer need it.

Bear in mind that shipping containers come in different dimensions, too. This way, based on your stock levels and requirements, you can pick the container size that best matches your needs and store all your products without any hassle.

Benefits of Accurate Demand Forecasting

Accurate demand forecasting can bring about a wide range of benefits.

On top of maximising profits and giving you a competitive edge, here are some other advantages that come with predicting future trends and customer needs:

Efficiency – Demand forecasting helps you allocate all resources effectively, leading to a more organised use of materials and team members.

Optimising Inventory Levels – Another precious advantage is that demand forecasting allows you to prevent issues such as overstocking and understocking. This can help you both avoid unnecessary waste and optimise your inventory levels.

Streamlining Operations – By predicting customer demand with accuracy, you can streamline operations, reduce lead times, and improve customer satisfaction.

Strategies for Effective Demand Forecasting 

Forecasting Methods and Factors

Demand forecasting processes will adopt different predictive considerations to identify customer trends and specific behaviour patterns. So, what are the various methods of demand forecasting?

Seasonality, for example, can have a huge impact on customer demand. If you manufacture sunglasses or sunscreen, you are more likely to see an increase in demand during the warmer and sunnier months of the year.

Location and geography are another important factors to consider. Trends can pick up exclusively in specific parts of the world or within selected regions. If you operate in one of those areas, you might expect to see more customer requests.

Companies often rely on a ‘moving average’ method, which calculates the average sales over a determined period. Based on the stats, you can jot down a smoothed-out forecast and prepare adequately.

Likewise, some businesses use the ‘exponential smoothing’ method. This specific system tends to assign greater weight to recent data and figures, allowing for a swifter response in the event of new trends or changes in demand.

Ultimately, demand forecasting in supply chains is becoming an increasingly crucial tool to stay on top of customer needs and drive your business forward.

If you need extra storage room to accommodate your increased production, don’t hesitate to get in touch. We have a wide range of shipping containers (for sale or hire) across our 20 UK locations to help you keep your stock safe and well-organised all year round.