A magic crystal ball and professional demand forecasting seem to be mutually exclusive. But even though predicting what demand forecasting will exactly look like in 2020 and beyond is impossible, it’s wise to look into best practices for demand forecasting. That way, you can be assured you’re ready for whatever may lie ahead. These 5 best practices should be robust enough to successfully guide you past 2020.
1. Hone your critical thinking and analytical skills
We collect more data than is humanly possible to sift through about how, when, why, and where people buy things. Also, recent AI efforts in the demand planning space are focused on organizing that information to generate accurate and precise forecasts. At first blush, then, the future doesn’t look rosy for the human demand planner. But that couldn’t be further from the truth. Future demand planning will be focused on the forecast’s real-life application. As the Institute of Business Forecasting (IBF) asserts, data is a language and the demand planner the storyteller. Companies will rely on demand planners to interpret and then use the data to devise creative solutions to business problems. In essence, the human side of demand planning will no longer be a cross between science and art; it’ll be more of an art.
2. Implement a demand planning tool decked out for the future
AI technologies, like machine learning and automation, are improving rapidly. We don’t necessarily believe robots will be coming for demand planners’ jobs anytime soon. But this kind of technology does have the power to drastically alter how we approach supply chain management overall and will play an even bigger role in the future. Demand planners need to be prepared.
So make sure your demand planning tools are future-proof. Don’t just think about how the software you use incorporates today’s latest advanced analytics features. Think about whether it will accommodate new advancements. For example, are software updates quick in coming and easy to install? No matter what solution you’ve implemented, your demand planning tools should be able to evolve and support you for years to come.
3. Building a consensus is the way to go
It’s not unusual for a group prediction to be far closer to the truth that that of any one individual. This may be an old example, but it’s a good one: at a county fair during the Victorian era, hundreds of people were asked to guess the weight of an ox. The individual guesses were all wildly off, yet the average of all guesses was nearly spot-on. Therefore, while we wait for technology to surpass us humans at forecasting, don’t simply rely on demand planners to arrive at the right answer. They may be responsible for the final forecast and demand plan, but it takes a village (seriously) to actually come up with an accurate and precise forecast.
4. Have a Plan B (and maybe a Plan C) at the ready
Forecasting is a process and an imperfect one at that. Things don’t always go according to plan. In fact, they usually don’t. A forecast might turn out to be wildly off, for example, or a weather event may disrupt shipment schedules. Whatever happens, it will have a ripple effect along the supply chain and may lead to stock-outs or an excess inventory situation.
So while your demand forecast will dictate Plan A, be prepared for other eventualities. Make general contingency plans that can be adjusted according to the situation. But don’t just steel yourself against disaster; consider what you should do if, say, if your product unexpectedly gets an endorsement from a big name celebrity and sells like gangbusters.
5. Know your market and understand macroeconomic trends
When you’re in the thick of things, it’s easy to forget to zoom out a bit and look at the bigger picture. Internal demand markers, such as inventory levels and the number of SKUs sold, are valuable data points and shouldn’t be ignored. But they don’t tell the whole story either. Technological advancements have made our world much smaller than it was even 10 years ago. And this is a trend that is bound to continue. Supply chains aren’t national; they’re global, and so are your customers. Know how the global market for your products is performing. Keep an eye on your competitors. And understand what effect macroeconomic trends may have on what you do in your home market.
While we unfortunately don’t have a crystal ball to peer into to see what the future may hold, we’re 100% confident that these demand forecasting best practices will be relevant no matter what. But in addition to following these, examining areas for improvement is also important. So what are 7 common mistakes that other demand planners around the globe (not you, of course) make? More importantly: what are the best ways to avoid them? Download this free eBook now.
John Galt’s solution ForecastX has over 20 forecasting methods built-in to the solution. ForecastX is in use by over 3,700 happy customers worldwide. Discover yourself what value ForecastX has to build better forecasts for better business.