The ability to forecast demand for your supply chain is imperative to inventory management and achieving sales goals. Qualitative forecasting is all about data. Data tells you what’s selling where and by what margins. Data can come from your company’s history of sales & inventory as well as external factors (such as market trends).
Follow these tips to prepare to forecast demand accurately:
- Gather lots of data
- Ask for help
- Know where data is coming from
- Utilize a demand forecaster
The more historical and current data you can provide for your forecast, the better. It’s okay to ask for assistance gathering and analyzing this information. Understanding where the data is coming from, what suppliers, which stores, etc., will help tremendously in making accurate forecasts. This can be done by hand using spreadsheets, but a demand forecaster speeds up the process.
4 Steps to a Qualitative Forecasting of Demand in the Supply Chain
We’ve covered tips for preparing the demand forecast in the supply chain. There are four essential considerations in getting an accurate forecast for inventory management. These include:
- Setting goals
- Collecting data
- Data Analysis
All this information gathering is excellent, but let’s back up a step. You need to have an objective. This data gathering won’t help if we don’t understand what we are looking to achieve through the analysis. t. Setting goals is the first step in getting the demand forecast started and providing a measurement of success.
You also can’t determine your forecast accurately because you have nothing for comparison. You must have an idea of what you will sell in order to know whether your business is succeeding or not. Goals can be increasing sales, lowering overhead, increasing profit margins and more. Any part of your business you wish to measure and improve upon is a business goal.
Goals must be SMART. Goals that are SMART have specific parameters they are measured by. These goals are considered successful when each item of SMART is achieved. These goals are:
Specific goals are very well laid out. We can’t simply say, the dog food category needs to make more money next quarter. How much more? $1? $100? $10,000? Production costs need to be reduced to increase profitability. By how much?
You can’t know if you are getting close to your goals if you can’t measure the data coming in. There are all sorts of data points that can be measured. Increased sales of a particular category of items, reducing the cost of supplies.
Goals are great, but if they are pie-in-the-sky goals, the odds of hitting them are slim to none. It’s great to have lofty or stretch goals, but make sure they are realistic too. What is realistic is different for different people. Make sure everyone agrees with what the goal is and is comfortable that the goal is achievable.
Qualitative forecasting only works if the goal is relevant to the objective. This is important because there can be several smaller goals leading to one larger objective. The plan has to have meaning to the team striving for it and be relevant to the business and the individual.
Lastly, a good goal is bound by time. Every business’s goal is to make more money. How much more? How long will it take? Remember to be realistic, set a deadline to make more money, and make the dollar amount a part of the goal (which takes us back to “S”.)
Data collection is the largest part of creating an accurate forecast of demand in the supply chain. It can be easy to get lost in the weeds here. Have a team that is responsible for this task. Not only will you want historical data for your sales, supply availability, and inventory, but you will also need to consider external factors such as market conditions and research.
Historical data is a history of what your company has done. It shows patterns in sales, lost inventory, supply availability and more. It can provide secrets and insights into profits, losses, customer demands, seasonal sales spikes (or missed opportunities).
Data analysis can drive you crazy if you let it. One scenario leads to another, and what-if analysis can become the bane of your existence. Focus on patterns in the data to see where demand spikes occur.
It can be great to write down some questions about what you want to use the data to find before getting into the analysis. Utilizing demand forecasting calculators helps make the process easier and less time-consuming. Software efficiently assists with this process. So leave all the what-ifs to the computer to forecast demand in the supply chain so you can focus on your business.
Understanding your data helps you to predict qualitative forecasting for the future. You can’t see where you are going without seeing where you have been. You also can’t make up for missed opportunities without adjusting your forecast. Adjustments will be necessary to accurately set your inventory management policies to forecast your supply chain demand more accurately and will need to be regularly considered.
Better Qualitative Forecasting with Blue Ridge Global
Forecasting demand in the supply chain doesn’t have to be complicated or labor-intensive. Setting SMART goals helps keep you on track and can help you catch those previously missed opportunities. Data analysis doesn’t need to overwhelm you.
Adjustments are just a click away when you have a qualitative forecast with Blue Ridge’s demand planning software. Our fully configurable supply chain management platform offers a cloud-based service to help you stay on top of your inventory and still meet customers expectations. We help you make informed decisions earlier so you don’t miss out on that next opportunity to increase profits.
Don’t miss another opportunity to put demand forecasting for your supply chain to work for you. Put our AI and machine learning to work so you can focus on what’s essential in your business, your customers. Request a live demo, or feel free to contact us with questions.