Wish you could gain insight into your business’ future? With supply chain forecasting, you can better predict upcoming demands and trends that might affect your company as well as its products.
While you won’t be able to predict everything that has the potential to impact your supply chain, studying the past can better prepare you for the future. Learn more about supply chain forecasting, the methods used to achieve it and how you can use it to improve performance below.
What Is Supply Chain Forecasting?
Supply chain forecasting enables businesses to predict future demand, supply and the pricing of products with the help of data and research. Companies can use all of this information as a means to improve their transportation supply chain performance, ensuring that the products reach consumers just in time.
Supply chain forecasting has several advantages, including insight creation, reduced costs and mistake avoidance. However, forecasting is never wholly accurate, and unexpected events can significantly impact supply chains. Also, supply chain forecasting can be costly and resource-intensive.
Importance of Forecasting in the Supply Chain
Anticipating supply chain fluctuations can significantly impact a company’s success. Staying one step ahead of changes can help you prevent problems before they arise or have the chance to negatively impact your business as well.
For example, seasonal demand variations could mean consumers are less likely to purchase ski jackets in June. So, if you run an outdoor apparel company, forecasting can prevent you from overloading your supply chain with jackets and reserving too many as safety stock.
Quantitative vs Qualitative Methods
There are two supply chain forecasting methods that businesses use to make supply chain predictions. Those two options are quantitative and qualitative.
Quantitative forecasting works by assuming that the future will mimic the past. This method uses historical analysis supported by hard data and formulas to predict future sales and demand.
- Exponential and Adaptive Smoothing: Exponential smoothing is a supply chain forecasting method that relies on weighted averages of historical business trends for short-term forecasting. Meanwhile, adaptive smoothing makes use of this same historical data, though it focuses on relevant variables for more accurate predictions of a specific time or product.
- Regression Analysis: This quantitative forecasting method looks at the relationship between two or more specific variables as a way of determining their influence on one another. Regression analysis is especially useful when an existing assumption needs confirmation.
- Moving Average: The moving average method uses the average of subsets of data, such as quarterly sales, to predict demand in the upcoming time period. This simple method doesn’t take into account seasonal demand or other trends, so it’s not suitable for all industry’s purposes.
Relying on hard data from the past can often help business leaders make accurate predictions about the future, but what can it do for new businesses and their products? Qualitative supply chain forecasting can help businesses fill this data gap with the help of flexible methods, such as market research.
- Customer and Driver Surveys: Surveys can help companies identify new demand in the marketplace as well as new consumer trends with their customers. Internal surveys conducted with drivers and others involved in your supply chain can also indicate viable areas of opportunity.
- Historical Data and Analysis: While there may not be historical data on a brand new product, there is likely something similar you can use as a comparison tool. By comparing products and supply chain methods against competitors, you can work on identifying areas where improvements within your company can be made.
- Market Research: There are many different types of market research that a company can use for the sake of supply chain forecasting, including interviews, stakeholder surveys and the analysis of competitors. Companies can find new possibilities to grow their business with these market research strategies.
5 Ways To Improve Supply Chain Demand Forecasting
All companies, both large and small, can improve their supply chain forecasting with these five strategies.
Decide Which Methods Are Best For Your Company
Depending on your company and its current needs, you should consider different supply chain forecasting methods. For instance, quantitative methods are best if you need to analyze data sets.
On the other hand, qualitative methods are better when it comes to incorporating customer and truck driver insights as part of your operations. A mix of quantitative and qualitative methods can also give you a bigger picture of your future supply chain challenges.
Utilize Forecasting Technology
Supply chain forecasting can be complex, and it takes time to unfold. However, forecasting technology solutions can make the process much easier and even more accurate. With AI-powered forecasting technology, companies can improve real-time visibility and reduce the effort involved with the help of traditional forecasting methods.
Observe Your Competitors
Companies cannot exist in a vacuum, and your competitors constantly influence your supply chain. You can stay proactive by monitoring and analyzing what competitors are up to while also learning from their successes and their mistakes.
Also, promotions offered by competitors can directly impact your sales. So, staying informed as to what your competition is doing can help you react accordingly.
Don’t Let the Data Go To Waste
Without proper analysis, data is nothing more than a set of numbers. Using the information provided via business data and researching effectively, you can gain insights that can help your company improve performance and prepare for future trends.
Incorporate Regular Data Analysis
The more often you perform supply chain analyses, the better prepared your company will be when it’s time to react quickly to upcoming changes. Perhaps your business could benefit from using a third-party logistics provider to meet current demands.
Alternatively, maybe a supply chain collaboration could help you optimize your flow of operations. Either way, by staying updated on your supply chain forecasting methods, your company can make these types of decisions with greater ease.
Transportation Supply Chain Forecasting For Your Business
In business, it’s always best to be first. With market research and historical analysis, you can learn a lot about the impact your company’s supply chain might experience in the future.
Supply chain forecasting uses quantitative and qualitative data to make predictions. From there, you can react as quickly as possible to upcoming changes as a way of helping your business grow and succeed for years to come.
Quantitative methods are more accurate when it comes to supply chain forecasting. However, they work best when combined with qualitative methods. Together, the two forms of forecasting can provide you with a fuller picture as to the future challenges and trends of your business.
The two primary factors that determine freight rates are the weight and volume of the shipment.
Currently, freight rates are dropping as a way of correcting for the high rates that were reached during the coronavirus pandemic.