5 Ways a Digital Forecasting System Will Drive Your Business Growth

If you’re a forward-thinking business professional, you’ll probably have come across the topic of demand forecasting before–and you’ll likely have asked yourself whether the benefits of demand forecasting make it worthwhile pursuing.

While we’re not here to convince you that demand forecasting tech gives you clairvoyance, it does get you as close to that magic power as possible.

When you’re able to make data-based predictions that accurately forecast how much demand your products will see in a given time frame, your planning processes become that much easier.

To give you a better idea of how that happens in practice, we’re going to explore five of the main benefits of demand forecasting for business growth.

1. Improves inventory management

It can be difficult to properly manage your inventory when you’re not sure how much of any given product you need. Do you order more than you think you’ll sell and risk having extras lying around and losing profit, or do you play it safe and wind up with stockouts?

As it turns out, there’s another solution that doesn’t require going to either extreme.

Demand forecasting makes it simple to figure out how much stock you’ll need to purchase–and where you’ll need to keep it, if you’ve got access to multiple warehouses.

By taking your past and present inventory data into account, a demand forecasting tool can generate realistic estimates for your upcoming sales. It also takes other factors into consideration that would influence sales, such as economic downturns or growth recessions, holiday periods, trends, and more.

Demand forecasting tools also look at what sorts of items sell in which locations, and at which times of the year. For example, if your winter-themed products are particularly popular in northern Europe between November and January, your tool can highlight this to allow you to plan accordingly.

You can then make this data accessible to your entire team using ERP (enterprise resource planning) software. 

This software integrates all business processes throughout a company into a single, centralised solution. It gives you more control over your inventory, helps you reduce stocking costs, and minimises human error. Your team will know where your stock is at all times and when you need to reorder specific products. It also gives you access to the historic data you need for accurate demand forecasting. 

The end result is a well-managed stock and inventory system.

In addition to making it much easier to track every detail concerning your inventory, this helps you bring in more bookings and sales. We’ll go into more detail on this shortly–for now, it’s worth noting that avoiding stockouts retains customers while helping your business grow. And it’s largely thanks to your demand forecasting-powered inventory system.

2. Provides insight to upcoming cash flow

One of the worst things to experience as a business professional is an unexpected change in cash flow.

It’s tough to look ahead to the next quarter or year when you aren’t sure what’s going to happen in the coming week. This is why it’s absolutely vital to make sure that the solutions you’re using help you stay on top of any cash flow developments before they happen.

Demand forecasting is ideal for this.

Since it creates predictions using past and present data, a demand forecasting tool can prepare you for upcoming cash flow developments well ahead of time. This gives you the room you need to plan and prepare appropriately.

3. Assists with business planning and budgeting

Preparing for the future is a vital aspect of successfully running a business, and you can only do that with proper planning and budgeting. This is often more complicated than it sounds.

Business planning needs to incorporate every member of every department. If your individual teams are each drawing up plans in isolation, your organisation won’t work as a cohesive whole, but as a series of disconnected silos each doing their own thing.

The same goes for budgeting. While each team or department might have its own budget, these ultimately come out of the company’s budget on the whole. That’s why financial planning has to happen on a company-wide scale as opposed to in small circles that exclude non-members.

This is where ERP implementation is absolutely vital. It lets you create plans that include every department without planning in isolation or without the whole business’ context.

On the subject of context, ERP is vital to proper demand forecasting. That’s because ERP software helps you collect historical data from all departments, then use that as the basis of your predictions.This ensures your forecasts are always fact-based, and that they help you move towards more optimised business planning at every turn.

This particular benefit of demand forecasting really shines during periods of economic difficulty. If you’re not using any forecasting tools, it will be tough to predict when your economic environment might change, meaning you’re more likely to be caught unawares.

And being left with a ton of unsellable stock during an economic downturn, a recession is the last thing you want.

On the other hand, when you do use demand forecasting tools, you’ll get a heads-up about any recessions and other negative shifts in consumer purchasing patterns in time to put the brakes on your stock orders. This lets you keep making sales without also suffering losses, helping your company continue to grow even amid difficulty.

4. Enhances product development

Demand forecasting focuses on figuring out what customers are going to want in the near future–so it’s no surprise that one of the major benefits of demand forecasting is its potential for improving your product development cycle.

Products need buyers. You can certainly try to pique buyers’ interest after you’ve already developed a full product, but it’s much easier to go in knowing exactly what your customers (or prospective customers) want and then design your product accordingly.

You can use demand forecasting as a means of gauging customers’ interest in a product while you’re still in the planning stages. This lets you then refine your product according to exactly what generates the most demand, so you can increase the chance you’ll be able to make plenty of sales.

You can also use the insights you get from demand forecasting to implement more business process automation in your product development cycle. That’s because you can automate all workflows associated with checking demand levels, so your teams can focus on brainstorming and designing while your automated software ensures they’ve got a market to sell to.

All of this results in a more seamless, streamlined product design cycle. That means you’ll be able to create more new products in less time, giving your company the room it needs to grow.

5. Strengthens customer service

The better your company is at building strong client relationships, the more easily it’ll be able to grow. This is because having lots of loyal customers gives you the steady revenue you need to be able to plan for expanding your business ventures.

Your inventory management has a major impact on your customers’ experience. A recent survey by ERC Europe found that around one-third of customers listed stockouts as a concern they have with companies:

As we’ve established, demand forecasting helps with this, meaning you’ll have fewer customer complaints to deal with. That, in turn, leads to happier customers and better overall customer service experiences.

Additionally, demand forecasting is great at addressing another item in the above graphic: queue times.

When customers contact your customer service team, they don’t want to wait around in a virtual queue forever–they want help now. This is much easier to provide when you’re able to accurately predict when you’ll get more queries, because then you’ll be ready for those queries with more customer service agents on call.
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Demand forecasting software can show you exactly when you need to have more support staff ready, and in many cases, it can even tell you what sorts of topics customers will want help with. You can then make sure your contact centres are fully prepared to meet that demand.

And remember…

Business growth needs to be sustainable above all else. Upscaling rapidly will ultimately mean little if your company can’t keep up with the demands of operating on a larger scale, just as scheduling growth without careful planning will wind up working against you once reality hits.

This is why you need demand forecasting software to help your company grow.

Thanks to the benefits of demand forecasting we’ve outlined, this tech supports your business and helps you grow organically and sustainably.

When you’re able to plan for the future according to realistic, accurate forecasts, you can make sure you’re well-prepared for any challenges that may come your way. In addition to making it easier to prepare your finances, you’ll be able to train employees and build bonds with customers to weather any storms and continue to grow in the process.