Demand forecasting: "Our suggested guideline"

Demand forecasting: "Our suggested guideline"

Leading edge organisations have recognised the importance of having an effective demand forecasting process and in most companies the primary responsibility rests with the marketing department to develop and prepare formal forecasts that support business plans for their product portfolios.

Demand forecasting methods

As the core principle of demand forecasting is to increase sales revenue and EBIT for your organisation, there are a number of methods that can be used to develop the most accurate projections which can be based on using qualitative methods, statistical methods or a combination. Delphi method, Jury of executive opinion, sales force composite and market survey are examples of qualitative methods that incorporate judgement and subjective factors. Statistical forecasts are usually based around the use of time series and causal methods where the projections are calculated from using historical data sales data.

Which demand forecast method is the best to use?

There is no single method that can be used to improve the forecasting performance of your business as too many factors and variables can influence the final outcome.
A number of global organisations tend to operate in a more structured fashion where global marketing would develop a forecast at a brand level for launch products and allocate these to local markets in Australia for example. By working closely with demand planners, the local marketers would then need to develop forecasts at a sku level within the brand and input these numbers into the forecast system. These projections are replayed directly to the supplier of factory which will be used to drive replenishment orders based on the actual sales activity within a local market.

Their success is underpinned by an iterative demand management process through close involvement with the first and final cut forecast projections from all stakeholders. Accountability is established and key performance indicators are monitored to ensure that the entire process is delivering the right business outcomes.

What is the best demand forecasting software?

As supply chain and logistics consultants, we are focused on providing our clients with the best solutions for a particular problem and are able to work with any number of demand forecast software applications to improve your performance. We have no commercial agreements with any software providers and will not advertise a preference for a particular application for any of our clients.

How to improve our forecast process?

We can work with you to implement an effective demand forecast process that will lead to addressing the common issues facing a number of organisations. It is important to review the entire demand management process of your organisation and then work towards synchronising all of the touch points along the supply chain from source of supply through to final delivery. Some common issues include:
  • Too much inventory of the wrong products
  • Excessive rework costs to break gift packs down
  • Not enough components to complete our gift packs
  • Marketing collateral is missing
  • Range plan is ready but there are no forecast volumes
  • Cannot plan standard lines with our tools
  • Promotional lines are never correct
  • There is no cut off for completing the forecast process
  • Our spreadsheets have been loaded but I want to change my numbers, is it too late?
  • Factory is waiting for our projections

The benefits of integrated demand management.

Once your organisation has adopted a framework for an integrated demand management process which overlaps divisional, geographic and technology boundaries, a number of tangible and non-tangible benefits may be realised which will provide your business or organisation with a foundation for continuous improvement. These being:
  • Improved supply chain visibility across the entire network of stakeholders
  • Improved collaboration opportunities as supplier and customer networks can be linked via web solutions
  • Linkage between ERP systems and Forecast system within a single environment network will allow regular data modelling opportunities.
  • The ability to move from planning to managing touch points across the supply chain to further improve supply chain response to meet changing client demands.
  • Improved staff retention levels.
  • Ability to make quicker, better and accurate transport mode decisions for inbound air or sea mix consignments.
    Improves EBIT position
  • Managing inventory investment level against inventory policy settings will improve your organisations cash position