With forecasting, you are able to have insight into potential future demand for your manufacturing operation. Keeping track of sales and spending is critical when it pertains to attempting to achieve operational efficiency and eliminating cost. You are more likely to maximize profits if you are are coming close to accurately projecting your sales, revenue, and expenses.
Accurate forecasting aids with reduction of unnecessary spending, proper scheduling of production/staffing, avoiding missing potential opportunities, and managing your overall cash flow. Within this blog we are going to discuss the advantages of using accurate forecasting within a manufacturing operation and the benefits associated with it.
The Main Advantages of Accurate Forecasting
The main advantages of accurate forecasting include the following:
- Enhanced Financial Planning - With accurate sales/demand forecasting, not only by volume but also by product or service type, you can ensure that you have the resources needed in order to pay bills on time. This will not only help with avoiding penalties and potential loss of access to important vendors, but it also helps you with relying less on credit and reducing interest payments. Meeting with your sales people and clients each quarter to accurately determine potential sales/demand will enable your production to run smoothly and help you with better managing your finances.
- Improved Staffing - If a business is seasonal or you are aware that you have slow/busy period at certain times within the year, then plan on increasing or reducing staff whenever you find it necessary. This will help you bring additional workers on early enough to train them or use contractors during busy times instead of having to hire new employees that you will need only for a short time period. Understanding your demand also aids with planning the sales level at which adding another shift o expanding production capacity is profitable. If you are able to accurately forecast office staff needs, then you can create a better organization chart, ultimately enabling you to hire and staff proactively.
- Enhanced Targeted Marketing - When sales are slow, it doesn’t always mean that you can afford to cut back on advertising or promotions. If you are able to accurately plot your revenue during the year, then you will also be able to schedule more low-cost marketing during slow periods and plan for more expensive marketing efforts during a busy season (or when you have more cash). If you are able to create an annual or quarterly media schedule, then you’ll be able to ensure that marketing contractors you rely on are available when you need them and you will not be scrambling to find a replacement for an important project.
- Enhanced Production Management - By far one of the biggest perks of utilizing accurate forecasting the just-in-time method of inventory management schedules production near expected sales or delivery needs to reduce inventory carrying costs. Accurate sales and demand forecasting enables you to spread out production to ensure your customers and clients have products when they need it. Sales also differ from demand in the regard that some of your customers, usually retailers, may need to stock their shelves or fill a warehouse before items start selling. While you may be able to easily product last-minute orders, if you can’t get a product shipped at a time because you haven’t scheduled a trucking company, you may lose the sale. Adequately forecasting a product enables you to better plan your production needs.
A software that can easily aid with adequate forecasting is Advanced Planning and Scheduling (APS) software. Advanced Planning and Scheduling (APS) software enables manufacturing operations to interpret data based off of historical sales data as well as real-time data and incorporate it into the production process. Advanced Planning and Scheduling (APS) software is a must for manufacturing operations that are seeking to improve operational efficiency within their production process as well as eliminating costs.
Advanced Planning and Scheduling Software
Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.
- Create optimized schedules balancing production efficiency and delivery performance
- Maximize output on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to capacity
- Enable scenario data-driven decision making
Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.
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Topics: Demand Forecasting