As winter approaches and the holiday season draws near, businesses are preparing for one of their busiest times…peak season. For manufacturers that design, build, or assemble products to order, the peak season brings a surge in demand. To handle increased sales effectively, demand forecast accuracy is a must.
In this blog post, we’ll explore the importance of precise demand forecasting in supply chain planning. Plus, discover valuable insights into how to improve your demand forecast accuracy to ensure a successful peak season.
Exploring the 2024 Holiday Peak Season
Demand planners take note. The holiday shopping season will be impacted this year by the presidential election and a shortened holiday period. This pushes marketers to roll out their product campaigns early to capture consumer interest.
According to a recent article by Forbes, the 2020 election saw a dip in consumer holiday spending. The trend is expected to repeat this year. Plus, there will only be 27 days between Thanksgiving and Christmas. While the shortened spending period and a possible sales dip may be challenging, manufacturers can battle these obstacles with accurate demand forecasts.
Advanced advertising isn’t the only thing that needs to be pushed up this year. Companies also need to prioritize procurement and logistics to ensure they have enough inventory and can meet shipping deadlines.
Manufacturers that rely on overseas shipments should be on alert. Delays have surfaced in the Transpacific Eastbound shipping lanes over the past six to eight weeks resulting in space shortages. Robert Reiter, CEO of DHL Global Forwarding USA noted in SupplyChainDive Trendline that “peak season came early and will probably last for a couple of months.” In response to preparing for such delays, “contingency plans start today,” Reiter added.
These issues reinforce the importance of demand forecast accuracy as it pertains to marketing, procurement, and logistics.
What is Demand Forecasting?
Demand forecasting is the process of predicting future customer demand for your products. Manufacturers can predict future product sales by examining historical sales data, market trends, and other key factors. Accurately forecasting demand helps businesses plan their operations around key areas. These include inventory, production, and supply chain activities to meet demand without overstocking or running out of products.
Why Demand Forecast Accuracy Matters
With accurate demand forecasts, manufacturers can prepare for this year’s shorter holiday shopping season.
Peak season is known for its high demand, with customers shopping for gifts, home goods, and other seasonal items. For custom manufacturers, this means a significant increase in sales. It also comes with its own set of challenges. Here’s why demand forecast accuracy is crucial to prepare for this busy period:
1. Inventory Management
Accurate forecasting helps you manage your inventory more effectively. During peak season, it’s vital to avoid running out of popular items or overstocking those that might not sell well. This includes components and raw materials. If you don’t have enough stock, you risk losing sales and disappointing customers. On the other hand, if you have excess stock, you may face higher carrying costs and potential markdowns. This applies to any industry, including custom manufacturers.
2. Production Planning
Demand forecasts help custom manufacturers align production schedules with expected demand. That way you’re producing enough products to meet the holiday rush without ending up with excess inventory. By forecasting demand accurately, you can appropriately schedule production, reduce lead times, and avoid costly delays.
In addition to optimizing production schedules, accurate forecasts enable better resource utilization. By knowing how much to produce, you can allocate your resources more efficiently, reducing lead times and minimizing waste. This not only prevents costly delays, it maximizes the allocation of labor, materials, and equipment. The result is a more streamlined and cost-effective production process.
3. Supply Chain Coordination
Peak season involves coordinating with suppliers and logistics providers to ensure the timely delivery of goods. Accurate demand forecasts can help you communicate your needs effectively to suppliers and plan your logistics accordingly. As noted above, a shortened holiday season and overseas shipping issues reinforce the importance of this relationship. This will help you avoid delays, stockouts, and other supply chain disruptions that threaten on-time order fulfillment.
4. Customer Satisfaction
Meeting customer expectations on product availability and timely delivery is crucial during the holiday season. Demand forecast accuracy helps ensure you can create the products customers want when they want them. Meeting these expectations can lead to higher customer satisfaction, repeat business, and positive reviews. On the other hand, frequent stockouts or delays can drive customers to your competitors, damaging your brand’s reputation.
Strategies for Improving Demand Forecast Accuracy
Now that you know the importance of demand forecast accuracy, let’s explore strategies to improve your forecasting abilities for any time of the year.
Leverage Advanced Analytics and ERP Systems
Demand forecast accuracy ensures that your production lines run smoothly for on-time customer deliveries.
Modern ERP (Enterprise Resource Planning) systems come equipped with real-time data updates and advanced analytics tools that can improve your forecasting accuracy. These tools analyze historical sales data, market trends, and other relevant information to provide more accurate demand predictions.
Effective forecasting requires input from various departments within your organization. Sales teams, marketing teams, and finance teams all have valuable insights that can improve your forecasts.
Historical sales data is a valuable resource for demand forecast accuracy. By analyzing past sales trends, you can identify patterns and make more accurate predictions about future demand. Additionally, market research can provide insights into changing consumer preferences and economic conditions that may affect demand. Combining historical data with market research can help you create a more accurate and reliable forecast.
Regularly Update Forecasts
Demand forecasting is not a one-time activity; it requires regular updates to stay accurate. As new data becomes available and market conditions change, it’s important to revise your forecasts accordingly. Implementing a process for regular forecast reviews and updates can help you stay on top of changing demand patterns.
What is Frontier ERP?
For many manufacturers, Frontier ERP can significantly improve their demand forecast accuracy. Frontier integrates and streamlines your operational processes and is considered the best ERP for manufacturing custom products. It provides a unified platform for managing everything from inventory and production to sales and finance. With its comprehensive features and advanced analytics capabilities, Frontier ERP helps businesses make data-driven decisions for optimized operations.
How Frontier ERP Enhances Demand Forecasting
Advanced Analytics and Data Integration
Frontier ERP offers robust analytics tools for examining historical sales data, market trends, and other relevant information. By integrating data from various sources, Frontier provides a more complete and accurate picture of demand patterns. The system uses advanced algorithms to identify trends and make more precise forecasts.
Manufacturers can analyze past sales data to identify seasonal patterns and trends. This historical perspective helps you predict future demand more accurately. Frontier can also help you spot emerging trends in customer preferences and market conditions, allowing for adjustments to forecasts accordingly.
Real-Time Data Updates
One of the key benefits of Frontier ERP is its ability to provide real-time data updates. As new information becomes available, the system updates forecasts to reflect the most current data. Real-time updates ensure demand forecast accuracy even as conditions change. Automated updates also reduce the risk of human error and ensure that forecasts are consistently accurate. This dynamic approach helps your company respond quickly to new developments and avoid potential issues.
In fact, Frontier ERP has significantly improved data access for Marsh Furniture Company, an industry-leading cabinet manufacturer. “As a sales leader, it’s crucial to know what’s being ordered,” noted Ken Marsh, VP of Sales, “Our old system made it difficult to get real-time information. With the launch of Frontier ERP, I can access that information at my fingertips.”
Collaborative Forecasting
Frontier ERP facilitates collaboration across different departments by integrating inputs from departments like sales and finance. This enables you to create a more comprehensive and accurate forecast. Sales and marketing teams can provide insights into upcoming promotions, customer behavior, and market trends. Frontier ERP incorporates this information into the forecasting process. The finance team’s input on budget and financial projections helps align forecasts with business goals and financial constraints.
Frontier ERP includes advanced MRP and DRP for better inventory management and improved distribution.
Enhanced Inventory Management
Effective inventory management is essential for meeting demand during the peak holiday season. Frontier’s Material Requirement Planning helps businesses optimize their inventory levels by providing the most accurate forecasts and insights. By predicting demand accurately, Frontier ERP helps you maintain optimal inventory levels. The ERP’s forecasting capabilities improve inventory turnover rates, ensuring that products move efficiently through the supply chain.
Supply Chain Coordination
Accurate demand forecasting also plays a critical role in coordinating with suppliers and logistics providers. Frontier ERP enhances supply chain management by providing reliable forecasts and facilitating communication with external partners.
Businesses can use Frontier ERP to share accurate demand forecasts with suppliers. This helps to ensure timely delivery of goods and reduces the risk of problems from supply chain disruptions. Our ERP helps businesses plan their logistics more effectively, optimizing transportation and distribution to meet demand during peak periods. Plus, Frontier works seamlessly with many shipping software, including our partner Varsity Logistics.
In addition, Frontier’s Supply Chain Management improves communication and coordination with vendors and suppliers. It allows for monitoring of supplier relationships and the ability to monitor vendors. This can result in bulk purchasing discounts, lower procurement costs, and ensure a more reliable supply chain.
Conclusion
As the peak season approaches, the need for precise demand forecasting becomes even more critical for manufacturers. Accurate forecasting isn’t just about avoiding stockouts or excess inventory; it’s also about aligning your operations to meet the seasonal surge in demand effectively. Given the shorter holiday period and possible shipping delays, accurate forecasting can ensure a smooth peak season this year.
Would you like to learn more about how Frontier ERP can help your company get on track with demand forecasting? Contact us today!
