Learn here how to make a demand forecast!

Making decisions based on data, not guesswork, is absolutely essential for efficient management of any company. Therefore, demand forecasting is a highly effective methodology.

Its use helps companies efficiently manage their inventory, as well as in financial projections and feasibility studies for possible business expansion.

Want to learn more about this methodology and how to implement it in your company? Then keep reading!

What is demand forecasting?

This is the process that aims to project the need for a product. When forecasting, economic indicators, sales reports, and the company's intentions should be taken into account when analyzing whether sales increased during a given period.

Check out some points that can be assessed quite safely using this methodology:

• need to hire more employees to meet the new demand;
• investment in marketing actions and inputs;
• cash flow.

This tool can be used for different purposes:

• in order to analyze the demand for a specific product;
• from a market share.

How to make a correct demand forecast?

Regardless of the size of your business, maintaining inventory control is vital. Have you ever considered failing to serve a customer due to a product shortage? This situation can compromise your business's image, leading to not only losing customers but also seeing a drop in revenue. Below, learn what to do to prevent this from happening.

Define the objectives

Forecast analysis is impossible without clearly defining your business objectives. Remember, goals must be feasible and achievable. However, the definition should be for short-, medium-, and long-term scenarios, based on your overall and fragmented consumption of the product, service, or entire production.

Define the time horizon

Based on the objectives, the timeframe for which the demand will be forecast should be established. For example, determine that it will be for a period of two years.

Forecasting model to be adopted

After defining the objective, it is time to select which model to adopt, which can be the research method or statistical methods.

Data collection

Data collection can be primary or secondary. Primary data is information that has not been collected previously, while secondary data is information that has already been collected and is available.

Estimation of results

After data collection, demand is estimated for a given period. These estimates are usually presented in the form of mathematical equations, and the results are interpreted and presented in a simpler format to allow employees to easily use them.

What are the benefits of demand forecasting?

Among the benefits, we can highlight:

• better planning and future forecasts of the company's finances;
• planning of marketing actions;
• reduction of production or operating costs;
• improved storage management and inventory control.

How important is demand forecasting?

The importance is due to the need to know what will be, by estimate, your salesThis enables more efficient management of inventory and production. Any over-purchasing of inputs can lead to losses for the company, and poor inventory control can result in idle capital that could be invested elsewhere.

Therefore, demand forecasting provides organizations with valuable information about the markets in which they operate, as well as their target markets. It also enables management more efficient use of stock and capital employed.

Anyway, I hope this text is helpful to you! Share your opinion and tell us how you handle this issue at your company.