Demand Forecasting: How To Get It Right
Having one great idea for a business is fantastic and it’s amazing when it does well but, after a while, you’re sure to want to grow and expand, and your customers are sure to start asking… what’s next?
It’s very rare for brands to have just one product line behind them, mainly because it means that profits will be limited to a certain extent and future expansion will be restricted.
New markets will be exhausted relatively quickly and customers will start to lose interest – especially in the 21st century when competition is rife and consumers are an incredibly discerning and demanding bunch.
So what’s the answer? Make sure that you’re at the forefront of your industry, giving people what they need before they even know they need it – and, in order to facilitate this, you need to start investigating the whys and wherefores of demand forecasting, which will allow you to make informed and accurate decisions about the future of your business.
Demand forecasting explained
Basically, demand forecasting makes use of predictive analysis of historical data to estimate and predict future demand for products, goods, and services… which sounds quite simple when you say it like that but, of course, it’s not always that easy to get right, since people can be unpredictable in their behavior and fickle in their choices. What comes out on top as a really popular product can actually be very surprising indeed!
But it’s important to do your level best to get it right, otherwise, you could find yourself sitting with a warehouse full of unwanted stock that you just can’t shift or being unable to meet the demand for an item, which could see your competitors picking up your slack… which could do serious harm to your business reputation.
The reason analysis of historical data is as important, if not more so than your hardworking market research department is that the vast majority of products we see these days aren’t actually new. They’re upgrades, remodels, and adaptations – so looking back to see how well certain iterations have done in the past can help inform future decisions.
What affects demand forecasting?
Unfortunately, there’s an awful lot that can impact your demand forecasting successes, so familiarising yourself with the different factors at play is certainly wise.
Seasonality, for example, can dictate demand and you’re likely to find that certain products do better than others at different times of the year. Competition is another factor to bear in mind and you may have to make quick and sudden changes to your business if a new solution crops up from another avenue, stealing your customers away.
Choosing the right forecasting model for you
Deciding on your overall objectives first will help make sure you pick the right demand forecasting technique for you and your brand, enabling you to achieve your goals and take the next business step. Here are some of the different models you could consider.
This looks at external forces outside your business, as well as the general condition of the economy, to see what could potentially disrupt commerce.
This looks at aspects specific to your business niche or industry.
Any model over the course of a year or more is considered long term, helping you to identify annual patterns, take seasonality into account and future expansion plans.
Short-term demand forecasting is typically for less than a year, helping you to inform your daily operational requirements.
How can PLM consulting help?
When used appropriately, PLM software is an incredibly powerful tool for driving the design, manufacturing and release cycle of all your products.
Where scaling up and expansion is concerned, you’ll find you have a readymade framework for more efficient process management, so you can make specific changes as and when required in response to any issues that crop up.
What this means is that guesswork can be significantly reduced, allowing you to bring the right products to market at the right time… which is sure to be a win where your bottom line is concerned! If you’d like to find out more about what PLM involves, get in touch with us today.