Entrepreneurship is tricky. It’s a lot more than just having a good product or service to offer. You need to be on the top of your game and constantly keep tabs on the operations of your eCommerce fulfillment company. You will have to keep track on your inventory stocks, warehousing and logistics, and the correct and seamless operation of shipping packages for order fulfillment.
While you might be happy with the current performance status of your business, you can’t let that prevent you from exploring options for it to bloom further. Consider innovative warehouse solutions such as opting for warehouse automation and further improving your eCommerce warehouse fulfillment. This will help you in keeping real-time track of your stock levels and knowing for certain that you have enough inventory to always cater to consumer demand. This will eventually lead to higher order accuracy.
However, forecasting demand is trickier than entrepreneurship in general. No matter how many times you’ve done it in the past, you will notice a shift in projections every so often. The goal of this article is to familiarize you with demand forecasting and share some tips with you to enhance your ability to forecast customer demands and replenish inventory accordingly.
What is Demand Forecasting?
The projected analysis of previous data to estimate the future demands of the customers for a product or service, to make well-informed business supply decisions, is called demand forecasting. Demand forecasting aids in estimating the total future sales and revenue, so entrepreneurs can plan their inventory and warehousing procedures accordingly.
Tips for Forecasting Demand
Forecasting demand is very tricky, and while it facilitates you in estimating future sales and revenue, it requires a balanced mix of a flexible yet long-term approach. This means you need to be prepared to handle sudden demand influxes as well as have a sound and durable standing. We’ve shared some tips with you that will help you forecast consumer demand in an improved manner, particularly in periods of high demand influx such as the peak holiday season.
- Specify Your Goals For smooth and successful operations, before you do anything else, you must clearly specify your goals. Pick a particular product or a broad category that you are forecasting for, pick the specific timeline that you’re forecasting with respect to (for instance the peak holiday season) and decide whether you’re targeting a niche or the public in general. You will need to be non-biased, and ensure the optimization of your supply chain as well as your staff being on terms with your goals. Your eCommerce warehouse logistics too, must be capable of meeting your goals.
- Integrate Sales Data To get a unified view and detailed insight into the actual product demand, you must integrate the entire data obtained from your sales channels. Make sure to integrate thorough data such as reports obtained regarding innovative ecommerce fulfillment solutions and latest market trends, and not just the previous demand and sales data, to ensure order fulfillment accuracy.
- Repeatedly Analyze Data Opt for a repeatable data analysis technique, irrespective of it being automated or manual, so you can tweak your future forecasts according to the comparison in trends observed in predicted and real sales. As your business grows, you will need to optimize supply chain operations, consider order fulfillment services and renting warehouse space to increase your warehouse storage. Repeated analysis of data will also reflect on your storage space and determine whether you need to rethink your warehouse logistics for an improved order fulfillment.
- Allocate Sufficient Funds After careful and thorough analysis of collected data, you are better prepared for forecasting, and you must allocate funds for growth straightaway. With correct demand forecasting, you can save on inventory carrying costs and other inventory requirements.
Types of Demand Forecasting
There are different ways in which businesses can forecast demand to leverage data over specific time periods.
This is usually done for a time of less than a year, such as planning for Black Friday and/or Cyber Monday and Christmas time shopping.
This is done for a period longer than a year, and it helps in identifying trends and patterns in seasons and planning production accordingly. It facilitates the long-term strategy of any business.
External Macro-Level Forecasting
Macro-level demand forecasting involves studying the external trends and patterns such as general economic conditions, shifts in market condition, and market research intel, etc.
Internal Business Micro-Level Forecasting
Micro-Level forecasting is focused on a particular industry or niche customer segment, such as analyzing the demand of chocolate among kids in New York City.
Passive Demand Forecasting
For passive forecasting, you need to use past sales data to predict future sales. There is no need to use statistical or economic trends. If your business is affected by seasonality—for instance you run a gifting store that thrives during the holiday season—you must forecast demand for the coming holiday season by comparing with data from the Christmas prior.
Active Demand Forecasting
This involves factoring in external forces and doing market research, conducting marketing campaigns, and growth projections for your market sector. It is an effective forecasting method for growing businesses.
Benefits of Demand Forecasting for eCommerce Fulfillment
For making correct business decisions, a thorough understanding of demand forecasting is necessary. Although the forecasts can never have 100% accuracy, but they can walk you through the steps of increasing operational efficiency and offering an improved customer experience.
Efficient Financial Planning
Demand forecasting facilitates in making optimized budget allocation and other financial decisions more efficiently, resulting in improved cash flow, better allocation of resources, and improvement in all strategic plans and operations.
Forecasting demand requires businesses to sync their order fulfillment services with their marketing strategy prior to launching their products. This ensures that businesses offer the products their customers want, at the right time.
Pricing Strategy Development
Improved understanding of market opportunities allows businesses to expand through affordable and competitive pricing. Some products will only experience an influx in demand by temporarily cutting down costs, for instance through flash sales.
The right inventory management enables you to always have just enough stocks at hand without hoarding, as high inventory levels are expensive to maintain. With correct demand forecasting, you can save on the costs of warehousing and logistics.
What are the Demand Forecasting Benefits of Partnering with ShipBots?
ShipBots has eCommerce fulfillment centers countrywide, and our fulfillment center and custom order management software helps you manage your supply chain with ease and gives you an advantage over your competition:
- It gives you a heads up on inventory levels
- With our pre-built integrations, your orders are automatically imported from your sales channels to our fulfillment center
- Our software lets you keep a check on both slow-moving and fast-moving goods
- Information regarding expected stockouts
- Daily order status and performance
- Comparison of current demand to previous demand
- Affect of seasonality on your product demand.
ShipBots is a third party logistics fulfillment center that will store your products, ship, pick and pack them efficiently for you. Learn more about ShipBots and how you can benefit from supply chain awesomeness.