What is supply chain forecasting?

Supply chain forecasting is the process of using historical data, market trends, and analytics to predict future demand, inventory needs, and supply requirements. Finding that perfect spot between enough and too much stock is not easy. The goal is to balance having sufficient inventory levels to meet customer needs without overstocking and creating obsolescence. 

Unlike traditional forecasting methods, modern forecasting tools leverage real-time data, AI, and machine learning to improve accuracy and agility.

Why demand planning and supply chain forecasting matters

Demand forecasting in the supply chain is vital to stay competitive in a dynamic marketplace. Inventory levels must be monitored and adjusted regularly to save costs, ideally in real time. Too much stock means cash is tied up, and you need extra expensive warehouse space. Workforce planning tools allow for staffing levels to be aligned with changing or seasonal requirements. For example, demand planning and forecasting software helps with logistics and transportation optimisation. Understanding demand patterns leads you to the most efficient delivery routes, reducing transportation costs and improving customer satisfaction.

Collaboration across the supply chain

Successful sales and marketing strategies depend on collaboration between all stakeholders, including suppliers, procurement, production, finance, and logistics personnel. These departments must work together to provide a more complete and unbiased view of future demand. Suppliers can use the shared demand forecast to plan production and reduce supply disruptions. Modern technology and demand planning tools provide the facility for collaboration online using a shared dashboard.

Benefits of effective supply chain forecasting include:

• Reduce excess inventory and stockouts.
• Develop better supplier relationships.
• Set efficient staffing levels.
• Optimise logistics operations.
• Ensure customer satisfaction.

Organisations that understand demand patterns are better positioned to respond to demand shifts, seasonal peaks, and global disruptions.

How to forecast demand in Supply Chains

Wondering how to forecast demand in the supply chain? Here’s a simple step-by-step guide how SCCG have successfully implemented supply chain forecasting to their business:

1. Data Collection: Gather historical sales, market trends, and other relevant data. Data drives demand planning now more than ever. Ensure that data is cleansed, verified, and comprehensive. If it is inaccurate, so will your forecasts. Integrate data from various sources such as ERP systems, CRM, market research, and external databases to create a holistic view.
2. Demand Forecasting: Use statistical models and software to generate demand forecasts. Invest in a robust demand forecasting tool that can handle large amounts of data and provide accurate predictions. Conduct what-if analysis and prepare for various scenarios.
3. Collaboration: Encourage collaboration between stakeholders, including suppliers, sales, marketing, finance, and supply chain, to align forecasts with business objectives.
4. Differentiation. Segment products based on demand patterns, product lifecycle stages, and profitability. Segment customers based on buying behaviour, preferences, and order patterns. This allows for more targeted forecasting and planning.
5. Inventory Optimisation: Determine appropriate safety stock levels to buffer against demand variability and supply chain disruptions. Set reorder points based on lead times, demand variability, and service level targets.

Monitor forecast accuracy regularly and adjust models and methods as needed. Measure performance using key indicators (KPIs) such as forecast accuracy, inventory turnover, and service levels. These best practices can improve demand planning and forecasting accuracy, leading to more efficient supply chain operations and better overall performance.

Best Supply Chain Forecasting Tools & Software

Demand planning software solutions are designed to help predict future customer demand in an uncertain environment. Most cloud-based demand planning applications provide the tools to manage the sourcing and inventory management processes. Advances in machine learning (ML) and artificial intelligence (AI) applications within the supply chain are making it possible to adapt and update forecasts in real-time. Insights are provided by collecting, verifying, and analysing historical purchasing and sales data and evaluating market trends. Forecasts can be generated by product, group, sales channel, and key customers and fed back into an inventory or warehouse management system (IMS and WMS). Many demand planning solutions are available, providing visuals that include graphs and charts.

Collaborative forecasting in the supply chain

Successful sales and marketing strategies depend on collaboration between all stakeholders, including suppliers, procurement, production, finance, and logistics personnel. These departments must work together to provide a more complete and unbiased view of future demand. Suppliers can use the shared demand forecast to plan production and reduce supply disruptions. Modern technology and demand planning tools provide the facility for collaboration online using a shared dashboard.

Note:  Not all forecasts can be created and managed using historical data. Cross-departmental collaboration and market research are needed for new product lines to identify potential customers and future sales.

Choose the right solution for you.

Demand planning and forecasting software offers many options, so choosing the right one is important. The solution you select should be able to integrate with other supply chain applications, such as WMS, and any company-wide ERP system. The one that is best for you will provide both cost-saving and efficiency benefits.

Want to improve your forecasting accuracy?

Contact SCCG today to explore supply chain forecasting solutions that fit your business.