The global marketplace is growing at a frenetic pace. Manufacturers fiercely compete to produce countless goods, whether it’s clothing or electronics, pharmaceuticals, or food and beverages. Consumers have more choices than ever before. The market has been flooded with infinite options. At the same time, retailers and producers are finding it increasingly difficult to understand or predict precisely which products will sell and be successful.
Naturally, this means there is confusion about how much demand there is likely to be in the future for a particular product, how much production and inventory need to be maintained, or even how exactly the product needs to be priced according to consumer demand. Existing forecasting methods are not able to keep pace with the complexity of the marketplace and the fast pace of manufacturing. As a result, inaccurate predictions result in unsold inventory piling up, heavy losses from markdowns, etc. while profitable and in-demand goods are not readily available in stock.
Manufacturers have always known how critical the understanding of production demand is for business efficiency planning. However, it is evident that current forecasting capabilities can be further upgraded to help manufacturers thrive amidst the vagaries of a complex supply chain and a volatile global market.
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What is demand forecasting?
Demand forecasting is the process of estimating or predicting customer demand. Traditionally, this was done by analyzing historical data. Manufacturing organizations used demand forecasting to avoid losses caused by a mismatch between supply and demand for the products they manufactured. Many rely on basic tools like spreadsheets to collect and handle data for demand forecasting. However, these tools are not able to deal with the vast amount of data and can cause critical inaccuracies in the forecasting process. Most legacy IT systems used by manufacturing companies also have limited demand forecasting abilities. And as most demand planners have long realized, guesswork simply does not work.
Demand forecasting technology – the next big step
When digitizing manufacturing sales, manufacturers should also include demand forecasting capabilities. Advanced demand forecasting technology integrates into a manufacturer’s ERP platform, seamlessly bringing together all the information related to internal and external factors that can affect demand and production, under a single view. The integrated system collects and organizes the necessary information, which is then used to generate actionable insights.
Demand forecasting features of an integrated Digital Sales Platform can also ensure alignment between every aspect of the manufacturing business. It is done by facilitating seamless collaborative decision-making through a single source of truth. Incorporated intelligent capabilities allow manufacturers to forecast demand for individual products across all channels with high accuracy, and may even give manufacturers greater visibility across their supply chain.
The unpredictability of the global supply chain is one of the main reasons why businesses need upgraded demand forecasting tools. Demand forecasting tools can help businesses accurately assess risk and optimize efficiency across the board; from addressing rising supply chain costs, cost reduction exercises, cut mitigation from stock excess or out-of-stock situations, and protect profit margins.
When demand forecasts are precise and accurate, sales teams can focus on high-priority tasks. They get more time to better manage the most profitable customer relationships rather than spend time on minor yet time-consuming tasks, like constantly adjusting stock to deal with market volatility.
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Implementing demand forecasting for manufacturers – what to look for
The type of demand forecasting solution that a manufacturer needs may depend on a variety of factors. Manufacturers should consider the availability of statistical data within the organization, the type of product manufactured and its typical product life-cycle, how far-sighted the forecast needs to be, and how much accuracy is necessary.
Demand forecasting technology does not predict every outcome with 100% accuracy. However, a high degree of improved accuracy immediately benefits a manufacturing organization. According to a study by Gartner, enterprises that successfully integrate digital solutions for accurate demand forecasting can realize a 60% increase in profit margins. Accuracy in demand forecasting improves production planning and order fulfillment, stabilizes inventory levels, improves labor scheduling, and significantly shortens cash-to-cash cycle times.
Ideally, manufacturers can access advanced demand forecasting capabilities through a digital sales platform that is integrated with the organization’s ERP. The platform is positioned to collect historical purchase data from existing internal systems, and manage order data entry. That makes it possible to instantly view, track and compare data and provide a single authoritative framework for collaborative decision-making.
A solution that is custom-built for manufacturing sales incorporates the necessary digital sales tools, and connects them to deliver accurate demand forecasting. There are powerful cloud-based solutions that can enable demand forecasting accuracy. If budgets allow for it, manufacturers can identify technology partners to build custom solutions that match their business’s needs. However, manufacturers may find faster and higher returns with purpose-built software solutions platforms that fit business requirements with minimal adjustments.
Demand forecasting is critical to any manufacturing business operation and empowers decision-makers with the information they need to plan production, mitigate risk and meet demand efficiently. There is no reason to believe that manufacturers are at the mercy of supply chain disruption and market uncertainties. Investing in technology with demand forecasting capabilities is a strategic decision that provides a competitive advantage and secures business growth and profitability.
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