Why is Demand Forecasting Software Essential to Survive Market Uncertainty?
Is your business affected due to unpredictable market conditions? You may be in need to think ahead of time to combat the frequent ups and downs in the market. These ups & downs can sometimes be caused by your competitor offering new discounts and offers, or the market fluctuating according to the latest consumer trends. These factors can affect your sales strategy and lead to financial loss. Forecasting future demand is one of the solutions to survive these market challenges. Demand forecasting software helps you to make smart operational decisions for your business. Demand forecasting software allows your business to adjust and follow the demand of your consumers.
Managing supply and demand is a difficult task for the majority of companies. Forecast management software predicts your future sales and increases your inventory profitability. You need not worry about uncertainty hitting the market if you are using the right software solution to forecast demand.
Here’s a brief understanding of why demand forecasting software is essential for your business.
What is demand forecasting software?
Demand forecasting is defined as the process of predicting future consumer demand based on historical data, relevant business information, and other controllable and uncontrollable elements to generate short-term or long-term estimates of future demand. Factors such as promotions, product launch, discounts, and marketing significantly impact future demand predictions.
Demand forecasting is a tool used to predict consumer demand and make accurate decisions to manage the supply chain.
Using demand forecasting software, your company can estimate future sales based on your historical demand data such as sales history, booking history, and shipment history to make informed business decisions. Demand forecasting software acts as the fore most decision-making tool for managers to decide products’ prices, understand the market potential, and implement business growth strategies.
Why is demand forecasting software essential for your business?
The best demand forecasting software can provide your business with accurate forecasts to meet consumer requirements at the right time and in the right place. Here are a few reasons why you should consider implementing demand forecasting software for your business.
• Demand forecasting software helps businesses to predict upcoming demand for a product. For example, let’s say that you own a raincoat manufacturing company. Seasonality could be a significant factor in predicting raincoat sales. Raincoat demand will rise in the rainy season compared to other seasons. Therefore, demand forecasting software would take into account this factor based on the geographical region. Based on the historical data and other relevant factors, the software generates an accurate forecast. Once you have a clear idea of how your future demand would look, you can build strategies to balance your supply with consumer demand.
• Businesses can effectively manage inventory, increase inventory turnover rates, and decrease holding costs.
• Forecasting software estimates the upcoming cash flow to create an accurate budget of operational costs, workforce, and raw material required to invest in future sales.
• Demand forecast management software helps identify and rectify any upcoming supply chain issues to ensure that business processes continue to perform smoothly.
• Demand forecasting software also ensures staff and other resources’ management keep the operations running smoothly.
Without demand forecasting, managers might make poor decisions about products. For example, from the scenario mentioned above - If you miss the seasonality factor and won’t consider the increased sales of raincoats in the rainy season, you would lose sales opportunities during peak time. Therefore, such in appropriate decisions can adversely affect supply chain management, profitability, and inventory costs.
Types of demand forecasting
Businesses use various techniques to forecast demand. The type of forecast is generally based on the data and analytics monitored over a specific time.
Macro-level demand forecasting considers various economic conditions and factors affecting commercial situations. These factors help companies find portfolio expansion opportunities, research consumer trends, and keep up with other market shifts. For example, a hand sanitizer company can forecast sales increase after a global pandemic using macro-level demand forecasting.
Micro-level demand forecasting is preferred explicitly for a particular business, industry, or customer segment. For example, a company can generate micro-level demand forecasting to predict future watch sales for working professionals in the United States.
Short-term demand forecasting is generated for less time, usually less than 12 months. Short-term demand forecasting software estimates demand for less than a year. For example, a raincoat manufacturing company can use short-term demand forecasting to forecast its sales for different products based on its design, color, and material.
Long-term demand forecasting is carried out for more than a year. Long-term forecasts assist companies in planning for seasonality, production capacity, and annual patterns. Businesses can draw long-term strategies using demand forecast management software. For example, a cap manufacturing company can predict its product demand for the next five years using long-term demand forecasting.
Factors affecting consumer demand
Demand forecast management software helps businesses to balance the supply chain with sales and marketing. Learn about the various factors affecting demand forecasting.
• Seasonality: Seasonal demand refers to a specific time series with repetitive demand patterns due to re-occurring seasonal events such as religious events, weather patterns, and traditional behavior patterns.
• Competition: Customers have many options to choose from, for example - Multiple brands and a similar product with various features available in the market, affecting the demand for your product.
• Types of goods: Demand forecasting varies for different goods and services depending on the products’ life cycle.
• Geography: The customer location and the place where products are manufactured, and orders are significantly shipped impact demand and inventory forecasting.
The above examples give you a precise idea of why demand forecasting is essential for your business. You can also create new business opportunities using demand forecasting. For instance, consider the long-term demand forecasting example. A raincoat-manufacturing company can enter the market with a new product, such as an umbrella, and forecast its demand based on previous raincoat sales.
With demand forecasting software, you can make informed business decisions to meet consumer demand. Demand forecast management software also helps to manage inventory and optimize your supply chain management process. For instance, your product’s need has increased in New York, but your supply is insufficient. Or on the other hand, the product isn’t performing well in Los Angeles, but the supply is surplus. Both situations will hamper your financial projections. To avoid these conditions, you can manage your inventory using demand forecasting software. This helps you predict sales accurately to fulfill customer demand without affecting your business by stock-out and overstock conditions.
Avercast is an industry leader in delivering the best demand forecasting software for companies serving in every industry type. If you are looking for forecasting solutions for your business to understand consumer demand, contact our team today!