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Why is Demand Forecasting important?

August 2, 2021 | Divya Khare

Blog / Why is Demand Forecasting important?

What is forecasting? It is the use of historic data to predict the future outcomes. Demand forecasting is the combination of two words, demand and forecasting where Demand means any outside requirement of a product or service and forecasting means making an estimation in the present for a future result. 

Demand plays an important role in decision making of a business. In this competitive world there is a need to make correct decisions and plan accordingly. Forecasting on the other hand attempts to qualify what is possible if everything goes perfectly. The Supply Chain solutions work to optimally achieve that ideal picture by determining the timing and quantity to supply. Your focus, in our opinion, will differ based on how your company perceives inventory placement. If your customers expect a fully stocked shelf at the store where they purchase and are unwilling to wait or make a compromise, a precise demand plan is more important than a precise sales projection. 

Various types of Demand Forecasting

Broadly we can classify demand forecasting on the basis of level of detailing and time span. 

  • Passive Demand forecasting
  • Active Demand forecasting
  • Short-term Demand forecasting
  • Medium to long term forecasting
  • External Macro level demand forecasting
  • Internal business level demand forecasting

How much data is so much data?

Garbage in Equals garbage out is a cliche, but reality. To make disciplined, process-driven merchandising decisions, you must use analytics and data-driven processes, and to do so, you must have clean and consistent data. 

Pluto7 is happy to report that the days of data cleansing being a labor-intensive, manual process are over. Machine learning algorithms can now swiftly scan large data sets for anomalies and delete them automatically. As the algorithm learns more about your company, it may incorporate patterns and factors to give your forecasting engine an even better starting point.

Reasons why you need Demand Forecasting?

  • Inventory management
  • Improvised prices and promotions
  • Cost reduction for old products
  • Enhanced customer satisfaction

Some success stories

Google and Pluto7 software helped California Design Den reduce inventory carryovers by more than 50%. Inventory tracking and distribution, along with insights and visibility into product sales, are faster, more efficient, and accurate. Google Cloud Platform flexible pricing, speed, reliability, security, and scalability enable California Design Den to stay relevant and be more competitive.

Levis was facing a challenge in forecasting product volumes. With multiple suppliers in Asia that provide multiple products till date Levis Strauss & Co could provide a rolling forecast to the carriers but their 3PLs were still unable to pre-book containers/air freight space with Levi Strauss & Co nominated service providers. The accuracy of 90% was achieved in predicting the product dimensions in 6 weeks. The Pluto7 team was successful in eliminating errors for the upcoming products by providing accurate outputs to the vendors.

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Start your Demand Forecasting Journey now!