Improve Forecast Accuracy by Demand Forecasting Systems


The art and science of demand forecasting have both come a long way in the past 20 years. Yet as much as demand forecasting has actually enhanced, we believe there’s still lots of chance to take it much further. We’re especially passionate about the business results that future improvements will bring.

Today we share some of the staying difficulties of demand forecasting and the reasons for our optimism about conquering them quickly.

Although the subject of demand forecasting can be as dull as a rock, we trust you’ll share our interest when you think about how much demand forecasting can affect the quantity of money your business makes.

Why Demand Forecasting?
When you forecast demand for finished products, the financial consequences of inaccuracy can be huge. Forecast errors trigger you to run out of stock. The outcome is missed sales and miserable customers. Forecast mistakes can also cause you to carry too much inventory. You might need to obtain cash to pay for the unwanted. You could likewise need to mark inventory down, contribute it or even junk it just to obtain rid of it.

Forecast mistake minimizes earnings. It can likewise lower cash flow and increase the need for capital. Excess inventories yield a lower return on properties.

On the other hand, more accurate demand forecasts can reverse all of these issues. They can improve in-stock performance, increase earnings, enhance customer fulfillment, lower inventory investment, improve capital and enhance return on possessions.

What is demand?
Demand is the variety of devices your clients will get if you have the item in stock. It’s frequently the like sales, but not always. If your consumers wish to purchase 23 systems however you have only 20 in stock, your sales will be 20 devices, however your demand is 23.

Some companies have a hard time forecasting demand merely due to the fact that they can’t compare sales and demand. Simply puts, they have no idea just how much they can have sold if they ‘d had an item in stock. Forecast accuracy is a measure of the distinction in between your demand forecast and your real demand, usually revealed as a percentage.

What are the challenges of demand forecasting?
When demand forecasting works well, it can work truly well. Modern demand-forecasting systems can deliver forecast accuracy of 99.99 %. However such high levels of forecast precision are stubbornly evasive for lots of type of items.

Here are 4 main causes of forecast error:

  • Statistical forecasting methods have fundamental constraints due to the fact that they use the history of demand to job forward. If history instructs us something, it’s that the future is typically various from the past.
  • Statistical forecasting systems don’t comprehend the contextual or situational factors that affected demand in the past or that will influence it in the future.
  • Demand for some kinds of items in some circumstances is inherently harder to forecast than for others.
  • Human judgement and memory are undependable.


What to expect improved forecast accuracy?
In spite of these difficulties, we’re positive about the future of forecasting because of the merging of these essential trends:

  • New innovations have made it affordable for companies to collect and manage big periods of data. Data storage is cheap. Even little computers have enormously more processing power than they did 10 years back. The Cloud supplies practically endless capacity for storing and processing data inexpensively.
  • You can easily use many sources of comprehensive contextual data, including information about weather, understandings from social media sites, consumer communications with internet sites and other digital media, POS market-basket data, information from customer-loyalty programs, and so on.
  • The development of software as a service (SaaS) or Cloud-based demand-forecasting systems is altering the way you can create and handle forecasts.
  • The areas of neuroscience and behavioral economics have taught us a lot about how the human mind works. Our company know a lot more about choice making than we did simply 10 years earlier. The new insights can enhance the way we create forecasting systems.


Jointly, these trends means you’re likely to continue seeing huge enhancements in forecast precision. And we think the improvements are particularly most likely for items that are still hard to forecast. Stay tuned here for details.

Do you see any other signs that demand forecasting is most likely to enhance quickly? If so, what are your hopes and expectations?


RMS Consulting is a team of experienced technical and business professionals whose single aim is to deliver the world’s best retail management systems. We understand the needs and deliver cloud-based, multi-channel retail management system that brings together POS, eCommerce, CRM and marketing, merchandising and order management, financials, and warehouse management into a single centrally managed solution. RMS Consulting serves client inside North America specifically USA and Canada while physically serving clients in the cities of Seattle, Toronto, Buffalo, Ottawa, Monreal, London, Kitchener, Windsor, Detroit. Feel free to contact us or Drop us a note for any help or assistance.



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