Demand Forecasting: The key to a more effective Supply Chain

In today’s evolving corporate world, an effective and performing supply chain is crucial for success. However, variousDemand Forecasting: The key to a more effective Supply Chain companies face challenges such as their inability to meet customer service expectations despite having high levels of slow-turning inventory. This is usually what an under-performing supply chain leads to. It is the result of poor forecasting accuracy, ineffective planning processes, and production capabilities that are too slow to respond to varying market demand.

Such inefficiencies usually represent an obstacle to growth, leading to serious drawbacks in terms of dissatisfied customers, lost sales, bloated inventories, stale product and clogged distribution networks. In the end, resources and capital that could be better used to fuel growth through product development and marketing activities are consumed without any positive outcomes. One way to decrease these adverse effects of risks is by determining the demand or sales prospects for products and services in the future. The use of demand forecasting is the best solution in such cases.

Demand forecasting can be described as a systematic process that includes anticipating the demand for the product and services of an organization in future under a set of uncontrollable and competitive forces. It examines the amount of product your customers are likely to want during a specific amount of time. This kind of information allows organizations to have the right volume in stock; enough to fill customer orders. Hence, not so much time, money and effort are wasted managing excess or obsolete inventory.


How does demand forecasting contribute to the success of your business?

Demand forecasting allows a company to take several business decisions, such as planning the production process, purchasing raw materials, managing funds, and deciding the price of the product. Here are some major advantages of demand forecasting which help businesses to perform at an optimum level:

  • Increased customer satisfaction

The only way to keep your customers satisfied is by providing them with the product they want when they want it. Therefore, demand forecasting will help predict product demand so that enough product is available to fulfill customer orders with short lead times, on-time.

  • Reducing inventory stock outs

It is vital for organizations to understand the significance of demand forecasting, even if they are working in JIT System or with long lead time suppliers. When buying from long lead time suppliers, all you have to do is to send a demand forecast so that suppliers can arrange raw materials in anticipation of actual customer orders.

As for those using JIT Systems, demand forecasting allows you to time your purchases to correspond to when sales need to be fulfilled. Hence, the less time inventory spends in the warehouse, the less money you’re paying to let it just sit there waiting to be sold.

  • Lowering safety stock requirement

With an efficient demand forecasting process, there will be a direct impact in the planning of inventory levels:

– Developing production requests to manufacturing operations

– Development for new product launches

– Preparation for promotional activity

– Forecasting for seasonal variations in demand

A company using forecasting to plan any of the above scenarios doesn’t need to carry high safety stocks to manage those events. Less inventory would mean that companies are more likely to sell stock before it reaches its expiration date and has to be discarded.

  • Preparing the budget:

Demand forecasting plays a significant role in making budget by estimating costs and expected revenues. Consequently, demand forecasting enables organizations to prepare their budget which leads to a better planning of costs.

  • Expanding organizations:

Demand forecasting helps in the decision about the expansion of a business. It depends on the expected demand; if the demand for products is higher, then the organization may plan to expand further. Then again, if the demand for products is expected to fall, the organization may cut down the investment in the business.

  • Reducing product obsolescence costs

The volume of inventory on hand can be cut by recognizing, repurposing or eliminating obsolete inventory. In this way, both direct and indirect costs of keeping the obsolete inventory will be reduced. Through a standardised consistent way of forecasting demand, excess stock is not ordered and this will reduce the chance of obsolete stock.


Corporate training as a mean for building a better forecast

There is no doubt that demand forecasting is highly significant for the success of a business. This is a major reason why companies are increasingly investing in training and development programs to train employees in this area. Nowadays Demand forecasting training can be incorporated within organizations effectively through modern learning solutions such as e-learning, webinars, gamifications and simulations. These solutions can prove to be as effective as instructor-led training.

More and more global organizations are choosing modern learning solutions due to its practicality, flexibility and accessibility. For instance, the demand forecasting training at Procurement Academy,  is provided through interactive methods such as scenario-based video training which allow the workforce to practice the skills they are learning and apply it directly to their day-to-day jobs. Hence, such training bridges the gap between theory and practice where employees are more engaged and more likely to apply their knowledge and skills.

With an effective training and development program in demand forecasting, employees will have the opportunity to improve their skills to the expected level so as they can cope with any situation. This allow them to be better prepared for any kind of challenges. Choosing an effective training for demand forecasting can lead to several advantages for the progress of any company.

Achieving all the benefits mentioned above is possible if business leaders put in place proper resources. The key is to have competent employees who have the required skills and knowledge to deliver positive outcomes. With an innovative and performing training and development programs, employees can reach this level. For instance: the demand forecasting training at Procurement Academy offers a thorough approach which allows learners to understand the essence of demand forecasting and how to implement different strategies to achieve the best results.



With proper demand forecasting, organizational and business performance can be considerably improved, resulting in numerous benefits. From cutting costs to keeping consumers happy, demand forecasting is an essential element of supply chain management, helping companies fill orders on time, avoid unnecessary inventory expenses and plan for price fluctuations. Through a good training and development program, organizations are more likely to achieve the desired positive outcomes which ultimately leads to more productivity and profitability.

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