Optimize the supply chain with forecasting and demand planning

As the global supply chain becomes more complex, an effective forecasting and demand planning system is needed to anticipate future needs accurately.

By David L. Buss February 16, 2023
Courtesy: CFE Media and Technology


Learning Objectives

  • Understand why supply chains aren’t as efficient as they could be and what this means for companies and consumers.
  • Learn about the benefits of forecasting and demand planning and tools companies can use to make them effective.

Supply chain insights

  • COVID-19 put supply chain issues at the forefront due to increased consumer demand and a lack of personnel causing issues regardless of where the chain was.
  • Demand planning and forecasting can help companies anticipate and understand their market and be more proactive, but it has to be a constant process with full transparency and buy-in from everyone involved.

The COVID-19 pandemic put a spotlight on supply chains and it became even more critical to have accurate and real-time information. Even before the pandemic, the container shipping industry had already been facing considerable difficulties, including low rates and a surplus of vessels.

However, companies can offset the challenges of an uncertain market and unpredictable demand by implementing adequate forecasting and demand planning protocols.

Diagnosing the modern supply chain landscape

The current supply chain situation is far from optimal. Unforeseen bottlenecks, delays, and backlogs have resulted in reduced warehouse capacities, decreased labor pools and other logistics issues.

One of the main issues companies face is the inability to accurately predict demand in real-time and adjust their supply chain. This lack of visibility has led to costly delays and out-of-stock scenarios.

While the global supply chain has been optimized to a certain degree, there are many opportunities for improvement. Companies need to continue to optimize their efficiencies and focus on better accuracy in their inventory planning and demand forecasting to better meet customer demand and stay ahead of the competition.

Five benefits of demand planning and forecasting

Demand planning and forecasting solutions offer a wide range of benefits to companies. They can use accurate data to assess the current industry conditions better and make more informed decisions about their operations, including inventory management, supplier relations, and marketing strategies. There are many demand planning and forecasting benefits such as:

1. Improved accuracy

Demand planning and forecasting solutions provide up-to-date market intelligence that helps companies make decisions based on accurate data. With access to real-time information regarding past sales performance, current customer trends, and supplier availability, companies can make more informed decisions about their inventory needs.

2. Reduced risk

By accurately predicting future customer demands and requirements, companies can reduce the risk of overproduction or underproduction of products. This can lead to both cost savings and increased customer satisfaction levels due to the timely delivery of products and services.

3. Increased efficiency

Utilizing advanced analytics tools ensures data is processed quickly so companies can act to changing market conditions or customer needs. This saves employees who would otherwise need to manually calculate forecasts or analyzing data sets before deciding.

4. Scalability

Automated processes also allow companies to scale up (or down) in line with fluctuating market conditions without adding extra staff or equipment. This scalability creates an agile environment that enables companies to adjust their operations according to changing customer needs.

5. Better visibility

The insights generated by a comprehensive demand planning solution are invaluable when understanding market trends on a broader scale. Companies also can ensure they are stocking the right products at the right time by providing visibility into inventory positioning across all warehouses, distribution channels, and customer locations.

Five challenges to avoid when optimizing the supply chain

Managing and optimizing supply chains can be complex and difficult without the right tools and solutions. Many companies face challenges and pitfalls that can derail the process if not addressed and there are several common issues.

1. Lack of proper planning

Building an effective supply chain requires careful planning and forethought. Companies must identify problems and potential risks before they become too big to handle. Setting realistic goals, budgeting, researching suppliers, and organizing data are all essential components in ensuring a successful plan.

2. Not accounting for seasonal variations

Markets fluctuate throughout the year, often resulting in periods of greater demand or reduced availability of resources. To ensure stable operations, it is important to account for seasonal variations when creating a supply chain optimization plan. This could involve scheduling more frequent deliveries or adjusting supplier contracts.

3. Insufficient automation

Automation is critical in streamlining operations and ensuring processes run smoothly without human intervention or oversight. If automation isn’t correctly implemented, it can lead to bottlenecks or delays that may negatively impact the company’s overall success.

4. Poor visibility, communication with suppliers

Communication between suppliers and customers is essential for any successful business operation. Without it, customer complaints will mount up quickly as expectations go unmet due to miscommunication or lack thereof altogether. Be sure to stay on top of communication between all stakeholders involved by establishing clear protocols and guidelines to achieve better visibility into transactions and orders.

5. Overlooking technology solutions

As technology progresses at breakneck speed, so does the scope of what’s available on the market for boosting productivity and efficiency levels – and supply chains are no exception. Taking advantage of advancements like artificial intelligence (AI)-driven analytics software can help companies further optimize the supply chain according to current trends and levels of demand from customers, which provides an edge over competitors who are stuck using outdated systems or processes instead.

Five ways to improve forecasting strategy

Forecasting has become more important within the supply chain as companies strive to be more agile and responsive to changes in the market. Consider these tips on developing an effective forecasting strategy:

1. Develop a clear process

Having a well-defined process helps keep all stakeholders on the same page regarding predicting future demand. A transparent process also helps ensure decisions are data-driven rather than relying on guesswork or intuition.

2. Analyze the data

Collecting and analyzing past sales and market data can provide valuable insights into current and future trends in demand. Tools such as predictive analytics can help companies better understand customer behavior and anticipate industry shifts, which can affect supply chain operations.

3. Use algorithms to improve data flow

Algorithms are a great way to quickly crunch large amounts of data. This can help companies identify patterns or outliers in demand to create more accurate forecasts and adjust their strategy.

4. Monitor market changes

Keeping an eye on changes in the market is essential for staying ahead of the competition. This means companies must monitor competitors’ prices and strategies and watch for new products or services entering the industry.

5. Test different forecast scenarios

Testing different scenarios can help identify unforeseen problems and determine which strategies may be more effective in certain situations. This can also help highlight any potential risks or issues that could arise with a particular approach.

Adapting to changes with forecasting and planning

Forecasting and planning are essential tools for companies to stay ahead of the competition while ensuring their supply chain remains sustainable. By utilizing forecasting and planning, companies can anticipate changes in the market while preparing for potential risks that could arise. This is a key element of supply chain management and helps the business adapt to changes quickly.

Author Bio: David L. Buss is CEO of DB Schenker USA, a 150-year-old leading global freight forwarder and 3PL provider. He is responsible for all P&L aspects in the United States, which is made up of over 7,000 employees located throughout 39 forwarding locations and 55 logistics centers.