If there’s one thing we have learned during the pandemic, it’s that the developed world is dependent on its supply chain. When people think of the supply chain, most think only of the last two parts of it — delivery and returns. But the supply chain begins with planning. This component is critical for effective functioning of the next two parts: sourcing and manufacturing. And without those first three parts, there are no deliveries to be made.
So how do you plan effectively in a time of constant change? How do you plan, for example, for an 845% increase in the demand for toilet paper?
Probably no one can truly effectively plan for that, but smart supply chain professionals and business leaders can use forecasting tools to make good decisions in a changeable environment.
Let’s look at three forecasting tools, beginning with demand and moving up the chain through inventory to big picture sales and operations planning.
Using Software to Forecast Demand
Demand Forecasting Software enables companies to use historical data and relevant business information to predict consumer demand for a particular period into the future (e.g. the next quarter, six months, one year, five years).
Companies use these forecasts to seize upcoming opportunities, reduce inventory costs, adjust production and warehousing, make hiring decisions (e.g. more warehouse staff), deliver appropriate products to customers, and even to put limits on purchases. During the Delta wave of Covid, Costco used demand forecasting software to predict consumer demand for toilet paper and then limit how many rolls each person could buy based on available inventory and forecast production.
At its best, demand forecasting software enables you to forecast by key indicators relevant to your business model and to make financial projections based on the forecast results.
Using Software to Optimize Inventory
Overstock and out-of-stock scenarios are the misery of inventory managers, and they can be financially crippling to a business.
Companies in the retail and manufacturing industries can use inventory planning software to gain real-time insights that enable them to forecast demand, and then plan inventory with remarkable accuracy to meet the demand: stocking items that will move quickly and minimizing stock of slow-movers. Inventory planning software can be used to effectively manage raw material purchases, product operations, and product orders.
Managing the Big Picture with Sales & Operations Planning Software
When departments within a company operate as silos, it hurts the business. Agility is increasingly critical for companies in the current business and global environment. For a company to respond quickly and appropriately to changes in demand and supply, business planning needs to involve all stakeholders — executive, finance, sales, marketing, operations, supply chain, etc. — and everyone needs to have access to a common source of truth.
Sales and operations planning software enables company-wide collaboration and business planning. Forecasts can be generated at the company and department levels, and then projected with “what if” scenarios. This enables effective and accurate contingency planning that can then be used to adjust individual department plans, while measuring against the company budget. Companies can make plans that align with forecast consumer demand using a dependable and accurate system.
At the operational level, an S&OP tool enables users to drill down to the root cause of a problem in a few clicks, quickly generate sales and inventory plans, and optimize processes across all relevant parts of the supply chain.
Respond with Agility
We have no control over current events, but any company that isn’t using a well-designed forecasting tool is unnecessarily handicapping itself.
Forecasting software enables you to predict demand and supply, plan appropriately, and optimize operational processes. Using forecasts to gain a clear perspective on what’s down the road and then efficiently allocate the resources you have, frees you up to plan for growth.