2022.03.10
Why Forecasting is a Fundamental Engine for Business Growth
Accurate, responsive, and robust business forecasting is essential to meeting the changing and challenging needs of businesses and consumers today.
Accurately balancing supply and demand management, optimizing inventory levels, and forecasting future needs is challenging. Multiple internal and external factors impact every part of the supply chain—understanding these risks, and mitigating them, will boost the accuracy and reliability of logistics forecasting.
Here are five ways organizations can leverage reliable forecasting as a fundamental engine for business growth:
Meet Customer Delivery Expectations
Consumers expect products to be available when and where they want them, and next-day delivery is becoming the standard. Up to 69% of consumers are much less or less likely to shop with a retailer in the future if an item they purchased is not delivered within two days of the date promised. Consumer expectations are even higher during peak shopping periods, with 86% of shoppers reporting increased expectations for their retail deliveries over the holidays.
Retailers must continue to plan to meet rising consumer demands. Efficient forecasting means you can lower lead times and get products closer to consumers for faster distribution – and happier customers.
Give Consumers the Choices They Want
Consumers have never had more choices, and ensuring the availability of both new and existing products gives you a significant competitive advantage. Forecasting allows you to manage and mitigate risks to supply and demand across your product portfolio.
Forecasting is also a key consideration when launching new products. Per the Institute of Business Forecasting, about 17% of companies’ sales revenue now comes from new products. Forecasting new products can be difficult because there is no historical data. Create scenarios incorporating different assumptions.
Lower Operational Costs by Maximizing Efficiency and Reducing Errors
Consistent, reliable forecasting allows supply chain leaders to maximize efficiency. This leads to less waste, lower operational costs, and an improved bottom line. In fact, for Consumer-Packaged Goods companies, reducing over-forecasting error by 1% could lead to an average of $3.52 million a year.
Additionally, reliable forecasting decreases the percentage of inventory that may be sold at a discount or be made obsolete. This means every dollar spent on inventory is spent more profitably.
Drive Omnichannel Strategies Effectively
Enterprises are increasingly embracing omnichannel approaches, offering seamless customer experiences. Omnichannel provides more channels for customers to discover, embrace, and purchase brands’ products. For brands accelerating omnichannel strategies, however, each new route to market will require unique forecasting and distribution approaches. Customers expect speed, flexibility, transparency, and reliability from brands. Forecasting and staging inventory effectively is critical, making a strong understanding of current inventory across the supply chain a requirement.
Mitigate Global Risk
Supply chains are becoming increasingly global, resulting in a potentially fragile network that can be easily disrupted by events like the Suez Canal blockage or the COVID-19 pandemic. Forecasting helps you plan for contingencies to avoid these issues.
If your brand is reevaluating a global supply chain strategy, it is highly valuable to partner with supply chain experts to drive success across a diverse supply chain.
Conclusion
Business strategy relies on solid forecasts of likely future supply and demand. Good modeling supports stronger, more confident planning and strategy. In addition to these improvements, good forecasting also enhances your logistics and supply chain in more subtle ways. It adds discipline to your data collection processes, requires you to audit what works and what doesn’t, and encourages stakeholders to re-examine the most critical parts of the supply chain network.
Logistics forecasting isn’t easy, but it is possible through a deep understanding of necessary changes, and the resources and commitment to drive change.
Want to dive deeper into effective, reliable forecasting or need a framework to start forecasting?