Demand forecasting is a critical tool for any business but essential for manufacturing. The increased complexity of international supply chains and growing operational expenses have forced manufacturers to become more efficient in growing their businesses. Demand forecasting is an effective tool for this. Read on to learn how demand forecasting will ensure your business runs as efficiently as possible.
The Importance of Demand Forecasting
Demand forecasting is to plan for your future needs rather than constantly reacting to events in the moment. By predicting future product demand, manufacturing businesses will commit to working with shorter lead times without sacrificing quality. For example, knowing what we will need for our future spring designs enables us to source the required materials through the supply chain as soon as possible.
Excess inventory is costly to store and maintain and is an inefficient use of valuable expenses and resources that could be put to better use. Improved inventory management with demand forecasting ensures businesses have the suitable materials to meet customer demand without unintentionally being inefficient with their assets. Maintaining a strong supply chain involves monitoring many elements, but demand forecasting makes these challenges significantly easier.
Improved customer service is also a direct result of demand forecasting, as businesses can fulfil orders quickly and accurately, leading to increased customer satisfaction, loyalty and an increased likelihood that they will choose you for repeat business. On the other hand, the risks of not having a reliable demand forecasting system are significant. For example, overproduction results in a surplus of inventory that may not be sold, leading to material wastage and reduced profitability.
Avoid Supply Chain Disruptions Affecting Your Business
Due to the complexity of supply chains, disruptions in one area can have far-reaching consequences for adjacent industries. Recent global events like the Covid pandemic and Russia’s war in Ukraine have shown firsthand how disruptive ripples can spread across poorly managed supply chains. These impacts can continue to be felt even after the initial event has passed. As a result, businesses must remain vigilant in reassessing established routes and processes in the face of continued uncertainty.
Manufacturers unable to adapt their supply chain will suffer increased costs due to the need to compensate for disruptions with costly logistical solutions, such as expedited deliveries. Given the high stakes involved, businesses must prioritise supply chain management and embrace demand forecasting as a preventative measure against disruptions.
Demand Forecasting Elements
Any business forecasting involves analysing past actions based on their results and using this data to predict your future needs as accurately as possible. Here are a few examples of key elements required for accurate demand forecasting in manufacturing.
Market Research
Market research is a vital component of demand forecasting for manufacturing businesses. Although it primarily applies to product development, combining it with competitor research yields valuable insights when exploring what materials and designs your teams should invest in.
Understanding the industry’s direction and trends allows managers to prioritise the best materials and processes to draw more business to their operations than their competitors. For instance, businesses in the UK have shown a significant preference for high-quality, sustainable components from their chosen spring manufacturers over potential alternatives. By staying up-to-date with market trends and consumer preferences, manufacturing facility managers make informed decisions and stay ahead of this highly competitive industry.
Recent Data Analysis
Historical data analysis involves analysing past actions and results to identify established trends and estimate future needs accurately. This analysis is not limited to manufacturing supply chains but is also highly useful for sourcing materials. Predicting demand for specific resources relies heavily on past data as it reveals the scale of materials needed for completed projects, especially if you have clients requiring repeat work.
This data is a foundation for early estimates of what needs to be sourced for future works. Additionally, this analytical data is applied to the logistical performance of supply chains to find the best route and supplier to acquire materials within established deadlines. While historical data analysis provides informed decisions about the incoming elements of a supply chain and significantly improves a facility manager’s efficiency, it entirely depends on past events. As we have observed in recent years, past patterns can change unexpectedly, making it critical to continually monitor and adjust the forecasting process.
Statistical Modelling
Statistical modelling is an increasingly important tool for manufacturing businesses to create predictive models for their demand forecasting.
By analysing the historical data and conducting thorough market and competitor research, manufacturers like ourselves now develop increasingly reliable and accurate estimates for future demands, enabling us to achieve the most optimum version of our daily operations.
Statistical modelling gives managers the tools to optimise their supply chains, resulting in more predictable outcomes in terms of time and cost. Emerging AI software tools are being widely implemented to create these beneficial predictions for supply chain management in the manufacturing industry. These advanced tools are one of the many ways automation supports supply chain management. They generate highly accurate predictions and allow facility managers to make informed decisions that will optimise their operations and increase efficiency.
Custom Spring Manufacturer
As leading spring manufacturers and wire form manufacturers in the UK, we have successfully adapted our operations to include detailed demand forecasting to maintain and improve our services over time.
We firmly believe that bolstering your supply chain with demand forecasting will reveal significant improvements and ensure your business’s competitiveness. We use demand forecasting when creating all our products, including our most popular choice, custom electronic springs. Contact us to discover what we could make for your next application.