Demand Forecasting Common Challenges and Solutions

 Demand forecasting is the first step of planning that puts supply chain forecasting into motion. With accurately forecasted demand, you can plan your production, inventory, and even your marketing efforts. Demand forecasting refers to estimating demand for a certain product in a defined future time period. It helps you ensure availability, monitor changes in your demand, and make smart business decisions to enhance profitability. 

Demand planning and forecasting, if done right, enables you to streamline your supply chain operations, But it isn’t as simple as it may seem, especially in today’s actively changing markets. One major challenge in forecasting demand is ensuring accuracy, which is often dependent on various factors such as sudden changes in the market or unavailable products. Businesses also face many other challenges in forecasting demand, which can cause substantial errors. Are any of these six common forecasting challenges familiar to you? 

1. Dynamic Retail Industry 

The retail industry has been changing rapidly in recent years, and demand has become notoriously irregular. Relying heavily on past sales data can make it difficult for you to accurately forecast demand without risking a stockout or overstock situation. It is important to analyze trends and demand-altering factors when trying to forecast demand. 

2. Stockouts & Overstock 

It can be difficult to determine accurate sales numbers after a stockout. It’s easy to  end up over- or underestimating your demand. You might have sold more or less than you expected if you’d had more inventory. After a stockout, you might end up overstocking, leading to another cycle of loss of inventory and money, or understocking, leading to another stockout. 

3. Product Variety 

When you sell a variety of products, it can be difficult to manage demand for each product, especially if the products are similar to each other. You have to account for cannibalization and forecast demand for each product across each platform. This can be cumbersome and, if it’s not done correctly,  error-prone. 

4. Forecasting Across Platforms 

Many retail businesses today sell through ecommerce platforms along with brick-and-mortar stores. It can be difficult to manage demand and sales across these different sales platforms, which in turn makes effective inventory management difficult. 

5. Managing Lead Times 

When selling through more than one platform, you need to manage the warehouse for each location to ensure low lead times. It’s easy to end up with stock out, delayed deliveries, or overstock in one location, while your inventory diminishes in another.  

6. Forecasting for New Products 

Demand forecasting often relies on past sales data to analyze sales trends and forecast future sales. In the case of new products, there often is no historical data, making it difficult to generate accurate forecasts.

The Solution TransImpact’s Demand Planning Software 

A demand management system is the one-stop solution to your demand planning and forecasting requirements. With a good-quality demand planning solution, you can accurately forecast demand for any number of products using your past sales data and trend analysis. 

TransImpact, - a leading SaaS+ company, offers one of the most effective and accurate demand planning solutions available today. Using over 250 forecasting algorithms – created and refined over years by the company’s supply chain experts in response to their clients’ needs – it utilizes past sales data, trend analysis, seasonality market analysis, “what-if” scenarios and more to provide demand forecasts up to 99% accurate, for up to five years in the future, for any type of business (as long as it has inventory). The forecasts are accurate for both new and existing products, and point-of-sales forecasting enables the prediction of demand , across various platforms. Besides demand forecasting, it can be used to manage  inventory, streamline supply chain processes, manage warehouses, optimize safety stock, and more. 

To learn more about how your business could profit from using Demand Planning Software, get in touch.