Planning for the complex and variable world of omnichannel has changed significantly, to say the least. New fulfilment processes, especially in the retail world has brought its challenges to the industry. The demands of this are feeding into price life cycle planning and supply chain network design, but it requires a lot more considerations of the broad scope of planning that will be affected. In the golden age of omnichannel commerce, today’s SKU can be tomorrow’s hot item! That’s why you can’t base your forecasting and planning on historical data anymore.
While the new world of omnichannel is driven primarily by retail and e-commerce it is spreading to other industries quickly.
An accurate picture of demand is critical for enterprise‐level planning for financials, merchandising, assortments and so on. Your forecasting and planning must pull in near‐real‐time data from all the many channels, different touchpoints, social networks, and sometimes even open marketplaces. That’s how you determine what demand is right now and where it will likely be in the near future. This is what drives intelligent planning in the future: immediate, multi‐variant analytics.
This brings us to the idea of the demand forecasting. Demand forecasting isn’t a new idea in the market, in fact, traditional demand forecasting is quite advanced. However, many companies struggle to turn their SKU’s to the next big thing.
In order to clear your stock and prepare yourself for the next season, we arranged a list of a couple of ways you could improve your demand forecasting:
Products vs Groups
We recommend determining the objective of the forecast in order to prevent oversimplifying or overestimating demand. If you are trying to determine the demand for a certain product, do not run a forecast in the same way you would on a complete product line.
Additionally, you can run forecast that adheres to 80/20 rule, where 20% of your products make up 80% of your revenue. Identify these products and track the demand on them for a more accurate forecast that is more focused.
Lastly, if you will be running a demand forecast for every product or service that you offer, it is suggested to do few similar products at the same time.
Additionally, some suggest to involve other departments in this process and review your sales forecasts as well. We discussed sales forecasts in our previous posts.
Review your promotions
To successfully estimate demand, review your previous, current and future marketing plans. This will help estimate any campaigns that increased the demand for the product. Where possible, review the competitors’ promotions and if any of them had successes with something that you haven’t done.
Furthermore, review the future plans for the specific products or services. These should have at least some impact on your potential demand.
Analyse your market
As usual, review your market. Look at what your competitors have done, any successes or failures? Analyse what competitors, customers, bankers, and other people in your marketplace are saying and doing.
Analyse external environment
Run PESTEL analysis as a framework to gauge the macro-environmental impacts to your products and services. This helps you find out what’s behind the fluctuation in your customers’ demand.
Look at the previous months (if you can). Review both recent months and annual sales variances, as this will help you determine annual and seasonal fluctuations. When looking at historical data look at driving patterns behind demand, and any adjustments and marketing techniques that led to fluctuation.
Investigate your lead time
Not only that lead time will help you determine if you can meet the demand, it will help you determine how fast you can meet the demand as well.
Determine lead time by examining the raw materials and components focusing on a particular item. So, if you are forecasting for an item group take that into consideration when it comes to looking at your lead time.
Monitor your forecast. Always monitor your forecast, as you gather new data modify the forecast to reflect this.
Creating a successful forecast demand ensures that you have enough inventory for the upcoming sales period. With an accurate demand forecast, you will have operations that are more efficient, better customer service, and a reduced lead time on manufacturing products.