Just-In-Time production strategies are becoming common for manufacturing organizations that are looking to reduce inventory costs and shorten production lead times by producing items just as they are needed. This helps reduce the amount of work-in-process items that need to be stored in a warehouse before being processed by the next operation.
JIT scheduling can be challenging as planners and schedulers must balance having enough items to fulfill customer orders without having an excess of items in inventory. This is why Demand Forecasting is important as it allows manufacturers to keep inventory levels to a minimum while being able to meet their demand.
What is Demand Forecasting?
Demand forecasting is the process of predicting what the demand for certain products will be in the future. It identifies what both current and future customers will want to buy and tells manufacturing facilities what they should actually produce.
The data used to forecast can be historical data or real-time data and should allow you to make decisions about your future production. This task can be challenging. It is no secret that demand is driven by customers and that it is constantly changing. Unexpected external situations, such as the COVID-19 global pandemic, have also caused tremendous changes in demand for certain products.
However, understanding your demand data will help you avoid over-producing or under-producing certain products. It is important to understand that your data will only be as good as you interpret it. This is why many individuals choose to use software with demand forecasting tools to help them analyze their data and make better predictions.
Here are 5 reasons why demand forecasting is important for your business.
Five Reasons Demand Forecasting is a Must for Your Business
Increasing forecasting accuracy within your business is definitely a worthwhile investment to many manufacturing operations. Listed below are five reasons demand forecasting is a must for your business:
1. Customer Satisfaction
As demand is driven by your customers’ needs, the goal of every manufacturing operation should be to meet their needs. Providing your customers with the product that they want in a timely manner will increase their satisfaction and make them likely to purchase from your business again. Demand forecasting is beneficial here as it will ensure that you have enough inventory to quickly meet the demand.
2. Inventory Optimization
A thorough analysis of the demand for your products can help you identify products that sell well and others that don’t sell as much. This will help you decide which items you should keep a higher inventory for to avoid stock-outs and cause customer dissatisfaction. In addition, demand forecasting will allow you to better plan when to order items that have a long or varying lead-time to ensure that you always have enough on hand.
3. Decreased Safety Stock Requirement
Demand forecasting analyzes historical data for trends and seasonal patterns. Furthermore, it analyzes the overall change of demand related to external factors like promotion campaigns, price changes, or other external factors. This will allow you to have a better understanding of when you should keep more items in stock and when you can keep a lower inventory.
4. Improving Pricing and Promotions
Price changes and promotions represent external factors that can increase the demand for those goods and services. Demand forecasting that incorporates these factors will help inventory managers know if they should purchase or produce additional products to meet an anticipated demand surge. Effective pricing and promotion planning using What-If scenario analysis can help planners maximize the net revenue of the organization.
5. Cost Reduction for Expiring Products
Demand forecasting is especially useful for products that have expiry dates, such as in the food or chemical industries. Without proper demand forecasting, you run the risk of losing money if you produce too many items and have to sell them at a discounted price as their expiration date approaches. In addition, unnecessary storage costs are incurred when you are producing too many products.
Methods of Demand Forecasting
Demand forecasting allows manufacturing companies to gain insight into what their consumer needs through a variety of forecasting methods. These methods include: predictive analysis, conjoint analysis, client intent surveys, and the Delphi Method of forecasting.
A software that can aid with proper demand forecasting is PlanetTogether’s Advanced Planning and Scheduling Software (APS). This software allows manufacturers to have a thorough insight into their manufacturing operation with ease and aid areas that are in need of it such as waste, profits, costs, and more.
With PlanetTogether, we are able to make strategic decisions that improve operations. We can proactively prepare for anticipated increases or slowdowns in demand.
DICK MARX, MATERIALS MANAGER, KNAPHEIDE TRUCK EQUIPMENT
Using an Advanced Planning and Scheduling software that has demand forecasting capabilities makes it easy to predict your future demand.
PlanetTogether's Advanced Planning and Scheduling Software
Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.
With PlanetTogether APS you can:
- Create optimized schedules that balance production efficiency and delivery performance
- Maximize throughput on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to resource capacity
- Enable scenario data-driven decision making
The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!
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Topics: Demand Forecasting