Demand forecasting is an essential aspect of a business. Whether you are a small business or a big conglomerate, predicting the number of transactions you will make in the future is very important in ensuring that the right products are available when you need them.
Its been two years since the impact of the COVID-19 pandemic, and many businesses are still having a hard time with fluctuating demand and supply volatility.
In this post, we’ll discuss demand forecasting, the challenges and how Business Central customers can deal with demand forecasting.
What is Demand-forecasting?
Demand or sales forecasting indicates a process of estimating the level of product demand over a time frame—an inventory planner’s historical user data coupled with other data sources to make predictions. Demand forecasting empowers managers to make informed decisions when forecasting is appropriately done. They gain valuable insight into potential market opportunities, a key indicator for businesses looking to expand their horizon.
Inventory planners are concerned about accurate predictions of demand and supply. They want to avoid challenges such as loss of revenue, storing obsolete stock, high risks of stock-out, supply delays and poor customer satisfaction.
Businesses suffer from fluctuating demand forecasting because of two primary reasons
1. The skewness poised by the impact of the pandemic. Using the previous years’ data as a basis for the prediction can become a disadvantage because the pandemic has caused global market fluctuation in the demand and supply of products.
2. Customer behavior is shifting, so it isn’t easy to make assumptions about existing customer trends. Buying habits reflect current events and habits
Using a system that offers quality and accurate automation capabilities will go a long way in helping businesses make result-oriented sales forecast.
How do you deal with challenges?
Regardless of the unstable nature of sales and fluctuating demand, there are some practical steps capable of helping inventory planners stay ahead of their competition.
- Using appropriate and aggregated data is one of the most efficient ways to improve demand forecasting. Access to historical data from previous years with similar trends and market dynamics will help inventory planners make accurate predictions.
- Removing periods of stock-outs from your forecast. Noticing when products are out-of-stock, and excluding them from your forecast can help provide more accuracy.
- When evaluating forecast performance, it is highly recommended to examine categories separately. When you forecast demand, take into account the categories, product families or ranges and geographic location of distribution centers since this allows you to forecast demand more effectively and control it.
- Use better technology solutions to gain more insight into trends. The more data and variety of products you have, the more complex it becomes to forecast demand with tools such as Excel, which is powerful, but limited in processing large amounts of data or variability of demand forecasting methods.
Demand forecasting in Microsoft Dynamics 365 Business Central
Many ERP solutions offer reliable demand-forecasting functionality. One popular option is Dynamics 365 Business Central; it provides users with simple demand-forecasting functionality. Combined with other functionalities, Business Central helps manage and resolve its supply chain. Business Central provides complete visibility to critical supply chain processes. Users can receive and monitor alerts when order fulfillment shifts from the expected delivery time.
Failing to use demand forecasting endangers businesses’ poor decisions about market trends and product supply and demand chain. This poor data-driven insight can harm supply chain management, inventory stock management, customer experience and profitability.