Supply Chain Forecasting is Mission-Critical
Nobody can predict the future, but like weather forecasting, supply chain forecasting uses a wide range of data to help you plan. You’re missing out if you’re not currently using a supply chain forecasting solution.
What Is Forecasting in the Supply Chain?
Forecasting is a method of using available information to predict potential future outcomes. Supply chain forecasting analyzes historical data, market research, and current trends in consumer spending to forecast likely demand. It advises you on how much of each product type to order, with amazing accuracy in most cases.
For more details, check out What Is Demand Forecasting In Supply Chain Management?
Why Is Forecasting in Supply Chain Management Important?
Okay, so that sounds good, but is it really necessary? It is if you want to level up your supply chain management. Here are the primary reasons you should look into supply chain forecasting to boost your brand:
Optimize inventory levels and reorder points
There’s a delicate balance between ordering too little and too much stock. Since shopping trends come and go and consumer spending fluctuates daily, it can be hard to predict how many notebooks you might need to order for back-to-school shopping or how many sweaters you’re likely to sell this winter. Many brands wind up over-ordering and then liquidating or storing the excess inventory. Others may not order enough and miss the opportunity for more significant sales. Forecasting can help you optimize your inventory levels and predict the best reorder points for each product you carry.
Reduce storage space and excess safety stock
In many areas, warehouse space is at a premium and data is showing that the cost is only increasing.. You don’t want to spend a fortune to store excess inventory in a warehouse, only to sell it at clearance prices later. This excess stock is bad for your business and your bottom line.
Just as you don’t want too much inventory on hand, too little stock could become a crisis of the highest order. When shoppers come to your store to purchase their favorite staples or the latest trend, and you’re out of stock, you’ve missed that sale. You may have lost that customer for life as they take their business to a competitor with a more reliable supply.
Plan for promotional activities and product launches
How many t-shirts do you need to cover the demand caused by the latest superhero movie launch? How much of that hot energy drink do you need to stock to meet the demand created by their latest marketing campaign? How many of the latest new gadgets coming down the line should you order? Forecasting can help you predict all of these answers and more.
Manage seasonal variations
Yes, you will sell more swimsuits as the weather turns warm and more rain gear during the wet season. But how much more? Is this year’s holiday shopping season going to mirror last year’s? What will be the trendy color for next season? How long will the current social-media boosted trends last, and should you order more of that insta-famous cosmetic product? Forecasting can help ensure you’re ready for whatever next season (or the one after that) might bring your way.
Predict product demand in changing environments
As the economy takes unpredictable twists and turns, how will that impact consumer spending? The world around you is constantly changing, and consumer trends can be hard to predict, but forecasting has your back here, too.
Fulfill customer demand with shorter lead times
If your business works with backorders, you understand the need to get these items in stock and to the customer as quickly as possible before the order can be canceled. Using data to understand what products are needed based on region, location, and usage is critical. With predictive supply forecasting, you’ll be several steps ahead of demand, meaning you can fulfill these orders with less lead time than otherwise possible.
Reduce rush order fees for high-demand products
Rush orders can be a problem for your shipping department and directly impact your bottom line. Rather than going through the usual systems and being packaged and shipped as expected, these orders require special handling. But if you can predict demand and have an excess supply of highly sought-after products just in time for the orders to roll in, you’ll be dealing with fewer rush orders in the long run.
Maximize supply chain management
It’s hard to think of a facet of supply chain management that can’t be improved with forecasting. To get the most out of your supply chain, you need to know what to order, in what quantities, and when. If you want to easily predict all of this with ease, request a demo and see how we’ve helped other organizations like yours achieve success.