Benefits of Good Demand Forecasting

Running a business takes more than just a good product—it requires knowing how and where to manufacture, ship and sell it and creating a plan for doing so in both the short- and long-term future. Demand forecasting is a major part of ensuring that that your capital is allocated effectively and your business is running smoothly. If you haven’t invested in the team and tools to make strong demand forecasts, here are some reasons you should reconsider that.

Optimizing the Supply Chain

Managing the logistics of production and sales is an ongoing project on its own; from plotting shipping routes to tracking inventory at warehouses and manufacturing facilities, ensuring the chain of turning materials into revenue requires its own team of experts. A big part of supply chain management, though, is knowing where products should end up to be sold. Having a demand forecast to indicate numbers of sales as well as where and when products are sold makes just about every part of the supply chain easier to coordinate.

Smarter Budgeting

An accurate and informed budget requires strong estimates on your cash flow and how much of it is directed towards the material, labor, marketing and overhead costs. Demand forecasts are the foundation of building this budget, allowing you to make informed, confident financial decisions. In particular, being able to anticipate peaks or valleys in demand helps you budget accordingly, knowing that you’ll have enough cash available. Use the increased sales from one season to make investments and build reserves in preparation for periods of low demand.

Effective Pricing and Marketing Strategies

Along with ensuring you’re able to supply demand, a good demand forecast provides insight on how to price and market goods. Pricing strategies vary greatly depending on your position in the market and the value that consumers attribute to your goods. Being informed on the demand for a product can help gauge whether current strategies are working or not, and good demand forecasts offer projections into the future in response to new strategies. Is it a good time to lower prices as part of a promotion? Can you afford to raise prices on a product in limited supply? Should you try to encourage demand and boost sales on an old product to get it out of inventory? These are the kinds of questions that demand forecasting can help answer.

Demand is what drives your business and determines how to manage it. Understanding and anticipating market trends equips you to make smart judgment calls and maximize ROI, and the right software and expertise give you the best shot at making that forecast.


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