What is Forecasting?
Forecasting is defined as a technique that uses past and present data to make estimates of future trends. Businesses use budgeting and forecasting software to determine their sales strategies and plan budgets for the upcoming short-term or long-term period. For predicting upcoming sales, sales forecasting software uses logical analysis based on past sales, upcoming consumer trends, and seasonal analysis to determine future business operations and managerial decisions.
Why forecasting is essential for business efficiency
Forecasting is an absolute necessity if you want to get ahead of your competitors in a business. It is an essential aspect of every business. For example, if a business’s sales are consistently more than the estimated demand, the sales forecasting software will consider this increase in sales for future predictions. Without forecasting, you can’t have clarity of ups and downs in the business over the years, which leads to missing out on valuable sales opportunities. Your business could also experience stock-out and overstock situations due to an unclear vision of the future.
Benefits of business forecasting software include
• Promoting new business
• Estimating requirements such as resource and finance
• Making managerial decisions
• Co-ordination between all departments of the company
• Plan operations and budgets
• Plan future strategies
• Predict future consumer trends
Forecasting helps to discover new business opportunities and manage budget, workforce, and material accordingly. Accurate forecasts will help to increase your business economic gains. More over, the success of a business is determined by the accuracy of its forecasting.
For example, Consider a product forecast and the role of marketing, human resources, and supply chain management in business operations.
The workforce is based on the product demand, and the process includes training, hiring, and lay-off of the force. If there’s a great demand for products, training is reduced, and the product quality might suffer. When the production is less than the order, it might result in delayed delivery, loss of customers, and sometimes, loss of market share. Shipping costs might increase due to the demand for urgent delivery.
It is clear why forecasting is essential for a business. If future demand is predicted, all the processes can be managed efficiently, which results in the successful management of an overall business. Think of how your business can grow by forecasting sales and making planned decisions accordingly.
Importance of forecasting software in supply chain management
Businesses need to keep the right amount of production stock. If the customer demand isn’t fulfilled, there are chances that you might lose them to your competitors. Stock-out issues can cause a considerable loss to your business. Also, if there’s a product overstock, you will have to pay unnecessarily high storage costs.
In supply chain management, the best way to find the middle ground between these two conditions is to forecast product demand. Forecasting is the solution to identify future consumer trends and manage overall operations. Business forecasting maintains a balance between the supply and demand of products. Businesses use various techniques such as sales forecasting software and inventory planning software for predicting product demand for weeks and months in advance.
Demand forecasting software will help your business management activities such as budgeting, risk assessment, raw material planning, sales planning, and marketing planning.
Impact of forecasting on supply chain management include
• Balances inventory across the network and improves logistics
• Increases customer service metrics like on-time delivery (OTD), on-time in full (OTIF), case-fill due to optimized inventory levels
• Better visibility of product lifestyle management
• Keeps track of functions such as sales, finance, manufacturing, purchase, and logistics.
Role of forecasting in supply chain management
• Strategic planning of business
Forecasting regulates activities such as budgeting, risk assessment, and financial planning. Decision making for cash flow, profit margins, budget expenditure is also managed by forecasting.
• Initiates processes of supply chain
Functions of the supply chain like raw material planning, manufacturing, purchasing, and inbound logistics are initiated by forecasting.
• Drives processes of supply chain
Forecasting drives business processes like packaging, order management, and outbound logistics.
There are two types of forecasting techniques
1. Qualitative technique
2. Quantitative technique
The qualitative approach uses executive opinions, consumer surveys, sales force composite, and managers and staff opinions for forecasting.
The quantitative technique uses the Time series model and the Associative model to predict the future.
Do you own a business, whether small or large and want to know how various forecasting software can help grow your business? Avercast is the industry leader in designing budget planning software and business forecasting software for all industries. Get in touch with our experts to learn more about our financial forecasting software to manage your business budget.