Demand Forecasting: Modern way to manage inventory

There is a lot of hype in the market about demand forecasting and how big MNCs and E-Commerce leverage from it. But what is Demand Forecasting? In simple words, Demand Forecasting is a technique for estimation of probable demand for a product or services in the future. It is based on the analysis of past demand for that product or service in the present market condition.

To give you an example, Amazon earns more than one-fifth of its North American retail revenue just because local stores can’t forecast accurately. Big players in the market have already proved that forecasting is essential to remain at the top of your game. But we should also consider that it’s more than just predicting demand for your products. Demand Forecasting also plays a major role in managing cash flow and maintain lean operations.

How Demand Forecasting will help you?

Demand Forecasting will help you predict when to order new inventory, and how much to order. It is not only limited to just when and how much to order, but it can also help you decide correct rates/price for your product as per the market conditions. In short, you will have greater inventory control by being able to predict future demands more efficiently.

Strengthen the relationship with your supplier through demand forecasting.

Demand forecasting is not just useful for your business to minimize the number of underutilized stocks, it is also useful to maintain a healthy relationship with your supplier. With forecasting in place, you can place orders for inventory in time, reducing the burden on the supplier to provide material in a short amount of time. This helps your supplier to meet your demands and in turn, will help you to fulfill your orders on time. This creates a more efficient supply chain while decreasing the costs of wasted inventory and storage space.

How to do Demand Forecasting

There are many ways and formulas available to do the demand forecasting. But all the available forecasting techniques are based on the four necessary steps:

  • Define the market: Understand the type of market and customers your business typically caters to.
  • Divide total industry demand into its main components: Categorize the components required by the industry.
  • Forecast the drivers of demand in each segment and project how they are likely to change.
  • Conduct sensitivity analysis to understand the most critical assumptions and to gauge risks to the baseline of the forecast.

Based on the above four steps you can do successful demand forecasting.

But nowadays the process of forecasting is simplified, there are many software available which help to do demand forecasting. This software expects you to put all necessary details and then it will provide you with the forecasting through their predefined formulas.

If you are on any Inventory Management software then most probably it has its forecasting system in place. This software can provide forecasting by compiling the stored data. Similarly, ZapERP is an Inventory Management Software which also does forecasting for you. If you are on ZapERP, you automatically get the demand forecasting which is more advanced than any forecasting software. When you use ZapERP our algorithms automatically generates the forecasting which is highly accurate and the accuracy increases as you use the software.


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