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 very well that the secret to making money was simply giving people what they want. That’s it.  Demand Forecasting is all about that one simple thing – figuring out what your customers want so that you will have product in place to fulfill their demands: the right products in the right place at the right time.
For Capone, this was a task 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 and created a large scarcity of product. There was a serious supply void for the end consumer’s demand, one that Capone’s organization was more than happy to fill.

Compared to Capone’s opportunity, the modern retailer faces a much more competitive marketplace, and businesses are starting to understand that they need new technology to improve their demand forecasting abilities and their supply chain performance.

Demand Forecasting is Much More Than a Sales History Review

Most forecasting and replenishment systems are based on previous sales history and use that information to predict future consumer demand. Purchase orders are then generated based on sales history-based projections. The problem with this approach is that it can be rendered inaccurate by dirty data.

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 true 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 double sales in the next quarter could increase sales history. Demand forecasting software takes into account events such as promotions, lost sales and markdowns and cleans up dirty data and factors in sales anomalies such as weather events.. The result is data that more accurately forecasts real demand allowing for 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, but 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 in the best that new technology has to offer. Additionally, there are special forecasting methods and tools such as block history, freeze forecast and pattern after, that allow 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 on improving your supply chain efficiency 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 is one that needs to be closed to improve performance.
With the rapidly changing consumer habits in today’s retail marketplace, the importance of the demand forecasting continues to grow, making it even more important than ever for companies to change.

For more information on demand forecasting and creating a demand driven strategy that can work for your business, contact us. We can help you transform your company into a demand driven retailer or wholesaler, ready for success in today’s market.
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