Usually, people don’t like to be surprised. It is natural for individuals to feel safer when they are able to have a clear sense of what is to come. In the business world, this is even more important. Therefore, every entrepreneur needs to understand what demand forecasting is.
Demand forecasting is a way for entrepreneurs to try to foresee events, projecting potential scenarios for their business and creating strategies to be able to deal with all of them.
Our goal with this material is to help you better understand this concept, showing how you can create your demand forecast. So, shall we understand more about this topic?
Demand forecasting: purchases and sales
Within your company, several departments work simultaneously to ensure that the product or service reaches the customer, right? Some of these sectors are at opposite ends, such as the purchasing and sales sectors.
Imagine a hypothetical situation, in which the sector purchases more raw material than necessary, ignoring that there was a tendency for sales to decrease. That means loss, doesn’t it?
The problem is that this department does not always have adequate communication with sales. To avoid this situation, demand forecasting would be recommended. Below, we will show you some actions to put demand forecasting into practice. Follow along!
Analyze the data
Demand forecasting is not done at random. It is a study that considers internal and market factors. It is usually developed by the marketing or sales department, as these professionals have a more immediate reading of different scenarios.
However, this study benefits from information generated by several departments, such as accounting and the purchasing sector. All these data are used to project different scenarios.
Take different scenarios into account
If the demand forecast projects a scenario of increased sales, the company will need to evaluate the hiring of new employees, delivery logistics, customer service, etc.
On the other hand, a scenario of low demand calls for contrary actions, such as contracting credit lines for cash flow, evaluating product performance, among others.
Demand forecasting makes managers reflect on these situations, so that they create action plans to deal with the different scenarios that may happen.
Predict demand in practice
The first necessary step is to ensure that your company properly generates data. Modernizing processes and investing in management software are needed. Then, cross-reference these data with the goals that the company has for the period (growth, increased profit, etc.).
The frequency of the demand forecasting will change according to the strategy; however, it is not very efficient to have forecasts for very short periods, as this makes the operation more difficult.
Finally, make sure that this report is interpreted correctly. To that end, data collection and analysis of external factors need to be done carefully.
Consequences of ignoring demand forecasting
Failing to forecast demand is risky. Undertaking a business is equivalent to investing, and every investor wants some guarantee that their investment will bring returns. Therefore, the more you do analyses, the better.
In addition, being prepared for different moments helps your business to have more freedom to make decisions, preventing the company from being held hostage by market and economic factors.
Finally, your enterprise already produces data and reports. Creating the demand forecast is not something that will require major efforts – so there are no excuses for not doing this study.
Did you like this article? Then share it with your colleagues on social media and entrepreneurship groups on WhatsApp!