why do we need to forecast demand
In business, companies seek ways to gain an edge over competitors through marketing strategies, whether they are offering a product or a service. By forecasting demand for future periods, a company can alter its business and marketing strategy to satisfy expected demand by its customer base. For example, by monitoring consumer demand at specific prices, a business can stock items that sell well and scale back on items with poor sales. The company can also use this information to make adjustments to its pricing strategy, focusing on higher margin items or products that are in high demand. By following demand closely and making forecasts, the business gains an advantage over competitors who fail to identify a shift or change in demand
24. 08. 15 Sales forecasting is an important tool for any growing business, especially if you re a merchant selling online! There a few primary reason why sales forecasting is important to your business; the main being to determine your future revenue (Revenue Forecasting) and planning for any demand (Volume Forecasting).
Sales drives everything else relating to your business, whether you re online or offline! Your sales budget influences many different peripheral departments, and will help you make many important business decision. With this in mind, lets take a deeper dive into how sales forecasting works and more importantly, how it can work for your business. Related: Sales keeps an organization running. Without sales, your company would be dead in the water. Society would literally come crashing to a standstill if commerce as we know it ceased to exist. Weвd all be relegated to foraging in the woods for items to trade and barter with like our early ancestors okay, okay I might be exaggerating a little here, but I think you get my point.
Any self-sustaining company needs sales so that it can cover basic operating costs; employee salaries, procurement of inventory, marketing of existing products and or services. The list of expenditures that arise in the day to day operations are constant and never ending. To ensure that your business doesnвt have any unnecessary impediments on growth you need to put tools in place to ensure operational efficiency. A crucial part of planning for the financial success of your business is knowing: 1. Where revenue has been historically generated. 2. Where new sales are coming from. Knowing both of these will help you make statistically sound judgments regarding future performance. The key here is to benchmark results so that you can forecast not only revenue but also volume. This will allow you to plan your operations better and have clearer insight into your overall supply chain and deliverables.
Related: So what does it all mean? If you have a better understanding of the peaks and valleys in your sales cycles you can adjust your operations to run more in line with those learnings. Better forecasting is not only a great way to justify to your stakeholders why they should continue to have faith in you, but also a way to run a more agile organization. Forecasting can mean less wasted inventory through a stricter inventory control system, happier customers with a high rate of OTIF delivery (On-Time, In-Full) and having to not be forced into excess inventory sales that ultimately devalue your product. Conversely your marketing team will be prepared to combat forecasted lulls by scheduling timely promotions. The thing that most organizations will value the most is the fact that having a proper sales forecasting methodology in place is a perfect example of continuous improvement.
By really honing in and fine tuning as you move along and learning from your mistakes you will be able to improve a range of areas within your business. Having accurate sales forecasting will increase your profit by decreasing your cost and increase your overall level of service performance. Companies are ranked on the street by how well they achieve their quarterly sales forecasts. Make sure that yours are accurate. Related: Accurate sales forecasting can help you track data to gain insight into areas where improvements can be made. You then need to implement the findings in a measurable and scalable way. I hope that was helpful but if you have any questions feel free to comment below if you have any questions! To learn more about the value of your customers, download our free ebook on Customer Lifetime Value by clicking below:
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