Why Demand Forecasting Is Very Important In International Businesses
Demand forecasting is the key aspects of every business or organization these days. In this post, we are going to tell you some key reasons why you need to consider it for your business.
- Nowadays, several businesses provide products and services to their customers without having a clear figure of their demand. They just know about their consignments is the deadline but missing a right demand forecasting plan that can lead them to not suitably react to the changes. A product can make customers to choose the competitor's product when they are unable to get the product.
- Today, it has become extremely vital to track the demand for each New Product Development with a wide range of items available in the market and the growing trends of globalization. In international businesses, the future prices are not always stable and demand forecasting must be tied with all profit margins bearing in mind the prices as well as the costs of your production.
- Your company’s marketing team may not perfectly promote your sales in case you do not know how much is needed to produce. Your company has a risk of producing too many products which can lead you to loss because of holding unsold items if it overestimates demand. On the other hand, if you produce too little, then there will be a loss of potential profits and the marketing team cannot help you in this situation as well.
- Apart from this, changes in technology have added towards globalization and the improvements of technology make our lives more convenient so the rules of the game are changing. There must be forecasting about technological change as well as its bear upon demand, prices, and costs. Demand forecasting must be based upon changes in the external environment.
Key Benefits Of Demand Forecasting In Supply Chain
i. Boost Customer Satisfaction
Every business owner needs to provide his customers with the product they want and when they want it in order to keep them satisfied. This benefit of forecasting will help you predict product demand and so that enough products or goods are available to fulfill your customer orders on-time.
ii. Reduces Safety Stock Need
A proper demand forecasting process will have a direct impact on your planning of inventory levels. For example- Developing production requests to manufacturing operations, planning for promotional activity as well as for new product launches, planning for seasonal variations in demand. If your business is using forecasting to plan any of these scenarios then there is no need to carry safety stocks to manage those actions. Keep in mind that the significance of Demand Forecasting is much higher in JIT Supply Business, Made-to-Stock (MTS) and Assemble-to-Order (ATO) business.
iii. Reducing Inventory Stockouts
You must realize the Significance of Demand Forecasting in Supply Chain if you are working in a JIT System or with suppliers like China. In addition to this, you need to send a demand forecast if you are purchasing from long lead time suppliers so that suppliers can arrange raw materials or stuff in anticipation of actual customer orders or demand.