Every business needs to maintain an inventory for satisfying consumer demand timely. When customers order something, they want the product to be delivered immediately and not wait for long intervals. If businesses cannot fulfill demand, they would lose sales and customers might shift to their competitors. Thus, companies should maintain an optimal inventory stock for every SKU unit.
Is your business suffering from fluctuations in sales? If Yes, have you thought about a a way to stabilize your sales and thereby avoid losses. A robust demand forecasting planning software might be the solution you need. Different demand forecasting methods assist you in making sales estimates so that you can strategize operations accurately. An accurate forecasting allows businesses to make sales plans thus enabling organizations to comprehend consumer needs beforehand and organize their processes, finances, resources and supply accordingly.
Demand forecasting companies can help manufacturers to understand what and how much quantity should be produced to meet consumer demand. If the right quantity is not produced, it may result in overstocking or understocking. To prevent these circumstances, accurate demand forecasting is essential. Modern demand forecasting software uses machine learning and artificial intelligence to obtain error-free forecasts.
So, what Is Demand Forecasting?
Demand forecasting is the method of predicting future consumer demand for a definitive period by utilizing historical sales data and other relevant factors. Proper demand forecasting provides organizations with important information about their potential in the existing market so that managers can make well-informed decisions about growth strategies, pricing, and market potential. Without proper forecasting, businesses can make poor judgements about how many products to stock and target markets. This can hurt businesses for a long time in terms of supply chain management, customer satisfaction, revenue, inventory holding cost, etc.
Necessity of Demand Forecasting
There are multiple reasons why demand forecasting is essential for every business.
- It enables businesses to optimize inventory, minimize holding costs, and enhance inventory turnover rates.
- Demand forecasting assists businesses in setting their goals, budgets and strategies. Once you have understood what the future is like, you can develop an informed replenishment strategy for ensuring that the supply is aligned with the consumer demand.
- It provides information on the future cash flow, so companies can precisely plan budgets for paying operational costs and suppliers and make efficient investments for business growth.
- Through demand predictions, you can recognize and sort out any issues in the supply chain beforehand to ensure that the business performance is not hampered at any time. Forecasting can assist in maintaining an optimal inventory, that is neithertoo much nor too little inventory.
- Demand forecasting allow companies to understand when to increase their resources and staff to maintain a smooth flow of operations when demand is at its peak.
Managers can utilize demand forecasting software to determine whether the forecasts satisfy the sales quota. Suppose the sales quota meets or exceeds the predictions. In that case, companies should engage more resources and incorporate new marketing plans involving new technology applications to enhance sales and expand their business. On the other hand, if the sales are lower than the predictions and business objectives, managers should strategically think of improvement and motivate the employees to achieve their goals. They can also lessen their marketing budget and reduce resources to save costs. All these crucial decisions can be made by making precise forecasts.
AI in Demand Planning and Forecasting
In recent times with the launch of new technologies, forecasting software has been integrated with AI and machine learning. These new age tools ensure that you achieve far better forecasting accuracy.
Let us look at how demand forecasting companies can predict demand accurately with AI:
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Internal and External Trends–
Multiple factors influence product sales. Some internal factors include marketing, promotions, pricing, and product lifecycle. External factors influencing sales include demographic trends, consumer behavior, GDP, and regional weather information. It is essential to incorporate all these aspects for predicting sales and if the critical aspects are not included, the estimations would be wrong and result in a loss of sales. This is where AI helps. The AI collaborates with both the trends and analyzes them to produce the most accurate forecasts.
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Probable Forecasts-
AI can comprehend the actual orders by utilizing data page-view and insights. It collates information from different sources and platforms to estimate future sales, which is crucial for understanding the expected number of sales for a particular time.
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What-If Situations –
AI can consider numerous sales possibilities for creating accurate estimations. Businesses must judge the prospect of event occurrences that would affect demand for making correct forecasts. It assists in considering the transforming conditions for planning sales and supply for the future.
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Pattern Recognition –
AI is used to determine historical sales trends and estimate future sales. It examines different sales trends such as seasonality, market shifts, lags, and non-linear patterns to determine how the market performance will be in the future. Companies can estimate how much to manufacture by analyzing this information.
AI has made demand planning and forecasting convenient, and it examines every aspect that influences demand for goods and products by applying advanced technology. You can get more accurate forecasts by utilizing a robust and efficient demand forecasting system. An AI powered Demand forecasting software can even predict future sales for new product launches by estimating historical sales data of similar products.
About Fountain9
Fountain9 is a demand planning & forecasting company that utilizes AI-powered software, Kronoscope, for predicting demand accurately. The demand planning and forecasting software analyzes 9 unique factors, including internal and external trends influencing demand. This helps companies to stay ahead of the competition by knowing how many products they should produce and thus meet consumer demand effectively.