Essentials to better forecasting: "A simple approach"

Essentials to better forecasting: "A simple approach"

  • What is the secret to reducing inventory investment?
  • How effective is our planning process?
  • How to increase sales revenue and EBIT for your company?

A number of organisations are beginning to understand the importance of having an effective Forecasting process across their business and supply base. Designed, implemented and maintained correctly, you forecasting process can create a competitive edge through a more responsive and agile supply chain that will deliver high levels of customer service by sourcing, storing and supplying the correct inventory the first time.

Supply chain agility and response is achieved by smoothing demand through the removal of unnecessary process waste that hinders your supply chain delivering effective service levels to meet varying customer demands. This involves developing and implementing the right business inventory policy and procedures which are underpinned by an awareness of the current constraints, capacities and cost to serve of your supply chain.

Our approach to better forecasting

A Turn Key Solution will develop and implement a rules based forecasting process for your organisation which will allow retailers, manufacturers and wholesalers to become more profitable by being able to develop more accurate demand data.

By working on the drivers that influence the forecasting process, we are able to minimise variability of forecast demand by creating a more responsive and cohesive supply chain through the application of statistical forecasting techniques at item, brand, category or business level.

The aim is to collaborate with your customers and their suppliers to achieve greater levels of visibility across the supply chain before the initial buy or manufacture decision is made. Having the right technology, tools and processes in place will creates the opportunity for making timely and informed decisions on reducing operational costs and inventory investment costs without compromising customer service levels.

The essential components of a forecasting process

  • Open to buy method
The open to buy process is the starting point of your forecasting process for a typical retail organisation while other organisations in manufacturing, wholesale etc may use a variant known as an inventory policy or purchase plan that is developed top down or bottom up. The sales representatives manage this process and develop a first cut forecast based on their knowledge of markets, clients etc.
  • Marketing department input
Depending upon the size of the organisation, some global companies adopt an inventory allocation method which is a % based method for your region, while other businesses may develop their demand numbers based on their in depth knowledge of the local market.   
  • Sales department input
Sales representatives who work closely with their clients are able to develop a raw set of forecast demand numbers which are loaded into the forecasting software. Working with the demand planner, the integrity of the forecast will be validated and a final set of projections locked in based on agreed parameters, volumes and timing to market. 
  • Customer input
Depending upon the type of customer your business supports, some businesses are able to collaborate with their customers and work towards developing their requirements based on their specific industry or market. Other businesses which service mass market customers such as retail may adopt different methods through forecasting.

  • Statistical Forecasting
Based on the data which may consist of standard sku's, promotional skus, new skus and slow moving skus, statistical forecast analysis is required to aid in smoothing the forecast demand your product. There are a range of sales forecasting methods that can be applied.
  • Inventory Master File and Stock Integrity
The inventory item master file, bills of materials, work centre routings, cost files etc. All need to have the highest level of data integrity along with stock accuracy at an sku level. Poor data integrity can result in wrong buy decisions creating excess inventory or not enough inventory. Either way there is an added cost to fix the problem. 
  • Store Merchandising
An aggregate assortment plan needs to be developed which is based on all selling location layouts or range plans. This will include provision for new product launches, promotional items, gift with purchase, purchase with purchase along with marketing collateral such as point of sale, displays etc that support the final product presenation and sale.