Now that the festival is around there is an expected wave of demand for products at every store. Planning the products, the retailers are getting ready to block the shelves to increase their sales.
Is this Enough to Run a Business?
Running a business is not just anyone’s cup of tea, especially when you are willing to grow, gain profit and flourish every season. Mere assumptions don’t work! You need to roll your eyes and foresee the future. You need to understand the kind of capital you need to invest, the number of products you need to produce, and the inventory units you need to keep up the stock. And able to answer,
Understanding your demand and forecasting your projections at a historical scale is important to predict the future and foresee sales.
Well! The biggest challenge still lies in the shift of these projections for which you need to optimize your scale with time.
You need to understand how Demand Forecasting works in order to beat the challenge and make the right business decision. It is not hard to understand that demand is what is laid by the customer, and forecasting is the prediction that is done by the retailer to make supply decisions. But what’s hard is to get an accurate assumption of this demand with time and acquire the right amount of stock to meet the supply.
Demand Forecasting is a progressive method that uses historical sales data to predict future sales figures. It is a comprehensive process that involves everything from planning, producing, inventory, and warehousing to estimating, delivering, and logistics. It helps businesses analyze the market potential and strategizes growth that is far away from any risk.
For example, a store producing cake of different flavours refers to the last 12 months’ sales data and understands which flavour made high sales and in which season or occasion based on the past sales he is able to forecast the shortage, make a plan and keep a stock. In comparison to the one that is new and unaware of the flavours in demand, the prior store will always have the benefit of key sourcing.
Although no one can be certain for the future, several techniques can help you with a detailed analysis and better business estimation. So, whether you are a small business or large, Demand Forecasting can help you draw the margins and understand that there is no business without demand and it needs to be processed with high accuracy.
Depending on the season and festival the trend occurs anytime. There are many peak periods around the year when the sales are more than the other days. Viewing historical sales can reflect the important months where the sales dip or is good or a discount should be offered to engage the customer.
Efficient financial decisions are important to reduce unnecessary expenses and expand the opportunities to choose a strategic investment. Keeping extra stock at a low sales period just wastes resources and increases unnecessary budgeting. So pre-budgeting to enhance operational processes around forecasting demand is a must.
Anticipating what customers want and keeping the stock helps channel the offerings. Customers want what they want and acquire it when they want so your demand forecasting should be in sync with the market. Else you will lose the customer to your competitors and will take more time to engage the new.
Demand forecasting helps drive responses to harness analytical optimization and shape the inventory to reduce error over time. It helps you remain right at the place where you are, never under or over-stock. Your evaluated performance over time will increase word of mouth and gain expansion in business.
Demand Forecasting is a one-on-one task. The process requires testing, learning, and developing a strategy to enhance sales. Closely analyzing the products and efficiently tracking the sales can help make the right strategies for development. Network balancing should also be taken care of in order to constrain your business environment for a longer period of time.
Quick Tip – To avoid frequent stock out you need to keep a feedback loop and start your next forecast with updated allocations.
The benefits of demand forecasting can be truly tasted once you are aware of your current position and have a clear idea of where you want to reach. There are different types of demand forecasting that can help you weigh your data and depict it over a period of time. They are broadly categorized into two:
This forecasting deals with the economic level demand that is measured by the national income and Index of Industrial Production (IIP) etc. It helps businesses understand the opportunities for their expansion and market shift.
This forecasting deals with Industry level demand for products as a whole, such as demand for cement, clothes, steel, pharmaceuticals in India, etc. It guides businesses with statistical data for trade under any policy.
This forecasting deals with the product demand for a particular firm, such as demand for Raymond clothes, Birla cement, etc. It helps businesses improve the aggregate growth of products in the market.
If you are a new firm this forecasting is especially for you. It covers forecasts for a short period, generally from six months to a year and is most useful in making tactical decisions depending upon the nature of the industry you are in.
This forecasting is for a longer period. Generally done by the old firms for a period of two to five years or more to help take major strategic decisions, such as the expansion of plants, opening a new unit, etc.
To trail the influence and gather vital information about your business, simple and statistical methods are adopted which are classified under various models.
It is a very generic research technique that is completely goal-oriented. It requires customer-specific surveys which are in the form of questionnaires, surveys, feedback, or opinion that are laid out while purchasing a specific product. As this research is very random it should be taken care of in terms of location, geography, and demography.
This method is mostly adopted when businesses are forecasting low-demand products, as it gives a clear view of its sales in specific regions.
It is a complete knowledge and experience-based method that requires input from each salesperson of a particular region. The salesperson depicts data depending on the customer’s demand and evaluates the perspective that presents the final judgment.
This method is more accurate as it relies on the perspective of the salesperson who in case of any error is held accountable.
This Demand Forecasting is done by a panel of experts and facilitators that are appointed for a specific segment. The questionnaire is sent to the experts and a consensus scenario is attained after a few rounds of expression and discussion among the experts.
The method is mostly adopted by big businesses to get the most accurate information from the experts. The only flaw lies in, time consumption.
It utilizes a complicated mathematical equation to correlate influential factors with demand. An equation is fine-tuned and the variables are inserted to generate an accurate forecast. It is mostly used to track economic factors of the current scenarios like the businesses that flourished in the pandemic or the businesses that flourished before the pandemic.
The data of this method is adopted only when the controlled conditions are applied by you.
It is a unique method adopted to predict the future depending on the recording of the past and deploying the statistical analysis on the series of economic indicators like leading, lagging, or concurrent. The leading shows the market activity that is ahead, lagging that changes after a short time and the concurrency that varies according to the economic activity.
This method gives you a complete range of information about where your business lies and where you can take it.
It is a method that deploys historical data of around 20 to 25 months to project the demand scale by graphical or square method and forecast the specific product. The most granular level of growth can be attained by examining the date and time of the order, revenue or return. Depending on the data you can adjust your inventory and evaluate your business.
Quick Tip – In a competitive scenario as today, if you are not forecasting the demand, you are losing a lot, not only in terms of staff, production and sales but also in terms of efficiency and profit. A good forecast provides appropriate planning, selection, layout and management that lead to a profitable business.
With the market shifting so drastically it becomes difficult to track the customer demand and meet its expectations. Demand Forecasting helps you channel your work and make a record so that you are able to make decisions, launch products, plan inventory and optimize the supply chain as per the demand.
At ANS Commerce, we help brands build their business and take it to the level where they imagine. From brand building to demand management ANS works on everything to help you increase sales. You can also rely on us for inventory optimization, performance marketing, and warehousing to improve your conversion rate instantly.
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