7 Common Problems to Avoid in Demand Forecasting

Demand forecasting is an essential tool that helps you make sure you have what you need to meet the demands of your customers. Calculations you have for safety stock, cycle stock, and lead time will come into play and help you run your company in a cost-effective manner. Demand forecasting is critical for the financial health of your business.

Your old demand forecasting (if any) can become a habit, which means that, as your company grows, your prior methods won’t be effective. This can lead to expensive fixes. You can avoid most of these problems if you have a process that relies on intelligence. Here’s what you need to avoid:

1. Don’t use one demand forecasting calculation for all items when they have different characteristics.
2. Don’t overreact to spikes in demand by increasing the forecast. You’ll be left with too much stock that you can’t necessarily move.
3. Don’t overlook seasonal patterns when completing a demand forecast. If you do, you’ll find yourself having to tell your customers you’re out of stock when that product sells the most and have too much stock in other seasons.
4. Don’t overlook the importance of deviation for each item. You need to have a value for each to have appropriate safety stock and the right analysis to get the real profitability of the item.
5. Don’t forget to update the demand forecast based on changing situations, such as new clients or loss of clients.
6. Don’t forget to manage replacement item transition to avoid having double inventory. This will help you have a smooth changeover to new items being sold.
7. Don’t forget to filter promotional movement. Otherwise, you’ll have an inflated forecast and inventory, which means that buying tools may be unusable.

The majority of solid supply chain planning starts with a good forecast. StockIQ's proprietary forecasting algorithm has been tested on over 1 billion time series to ensure it generates accurate, sensible forecasts. If you have questions about the best demand forecast processes for you, contact us today.

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