Why Forecasting is Essential for Supply Chains
Forecasting in supply chains is a complex task with a lot of moving parts. Demand forecasting is the one that often gets the most attention as predicting the demand for items is paramount to supply chains. At the same time, however, data about current producers and suppliers along with any political or technological trends that could affect supply is also important. Predicting prices over the short and long term based on demand and supply information is also an essential type of forecasting for supply chains.
How can getting all of this forecasting right help your supply chain? Here is a look at a few of the top benefits.
Boosting Customer Satisfaction
One of the most important reasons supply chains need forecasting is because customers won’t be happy if they are not able to get the products they want right when they want them. Forecasting enables businesses to predict the demand for their products so they can ensure they have enough on hand to fulfill orders that have short lead times.
Cutting Costs Related to Obsolete Products
When obsolete inventory can be identified and repurposed or removed, the overall inventory volume can be kept down, thereby reducing costs. Being able to reliably forecast demand ensures that you don’t wind up with too much excess stock that could eventually become obsolete.
More Effective Production Scheduling
While forecasting is great, reducing your need for it in the first place can stave off a lot of potential issues. Look at all the current signals that indicate how demand is currently changing, and examine the way customers are consuming your products. By responding and adapting to these changes, you can reduce your reliance on prediction.
Reducing Requirements for Safety Stock
Sound demand forecasting can help with inventory level planning. When forecasting is used to plan for promotional activity, new product launches, and seasonal demand variations, high safety stocks won’t be needed.
This blog post was based off of an article from Supply Chain Digital. View the original here.