What You Need to Know about Forecasting Methods?

We have all wished we could see the future at some point in our lives. It would help us brace ourselves for many troublesome situations, and we could even avoid some. Just imagine, if we had foreseen the COVID-19 pandemic. We would have been better prepared to deal with it, and we’d probably be in different circumstances now, 2 years later. Just imagine how different it could be now.

Well, as enticing as the thought is, unfortunately it’s impossible to go back in time.

Though you cannot predict future day-to-day life, you can predict the future of your company.

That's right, you can see your company's future if you want.

You can forecast your supply chain for future time periods & strengthen your efforts to ensure better profit. Forecasting, better known as business forecasting, lets you plan your operations in the coming time to be ready to cater to upcoming demand. Before we tell you how, let us first tell you what forecasting is.

What is Forecasting?

As the name suggests, it’s the process of forecasting or predicting your business's future in various aspects of supply chain. It uses data from past sales, seasonality, consumer trends, and more to accurately predict your future sales. It helps you better prepare for the future and ensure product availability to consumers. This software helps you forecast every aspect of your supply chain, including inventory, sales, demand, and more.

Forecasting Methods for Supply Chain

The forecasting software that we mentioned uses hundreds of algorithms to forecast demand accurately. You can use various forecasting methods and techniques to generate predictions. These methods can be widely categorized as the quantitative and qualitative forecasting methods.

Quantitative Forecasting

The determining factor of quantitative forecasting methods is that they utilize sales history & other factual aspects to generate predictions. There are four main quantitative methods used in forecasting. Each of these forecasting methods have strengths and weaknesses.

Naive Approach

This method gets its name from its highly simplistic approach. It uses the most recent amount of demand to predict the demand for the upcoming period. This method is highly inaccurate as it doesn't account for factors like seasonality & trends. Moreover, this inaccuracy can lead to waste & overstocking.

Moving Averages

Compared to the naive approach, this method is more accurate as it uses the average of past periods to forecasat. This method is far from precise as it also doesn't account for a number of factors. This can cause both stock-outs and overstocking of products.

Exponential Smoothing

This method weighs certain averages differently from moving averages. It accounts for a single aspect differently, for example, taking an average of certain months from the past year to predict the current year. Though this is a successful short-term forecasting technique, it isn't practical in the long term.

Trend Projection

This method considers past sales trends to predict future sales. For example, if sales decreased last February, it will consider that trend to forecast lower demand for the coming February.

Qualitative Forecasting

Where quantitative methods rely on numbers, qualitative methods rely on numerically immeasurable aspects. These aspects include consumer opinions & experiences. There are also four qualitative forecasting methods.

Executive Opinion

Here, professional employees of the company in executive positions make decisions regarding the future. They study past sales, current situations, and use their industry expertise to make decisions and predictions.

Delphi Method

This method entails a multi-step process where reliable professionals predict future sales based on their knowledge. Another group of professionals then reviews these predictions before the executive-level decision-makers of the company finalize them.

Sales Force Estimates

The sales team uses their expertise to predict how sales might change in the coming time. This method isn't very reliable as it involves minimal supervision and no material proof as a foundation for any predictions.

Consumer Surveys

This method relies on consumer opinions of products to make decisions. This helps companies understand consumer views and make future decisions.

How Can Business Forecasting Software Help You?

The above methods are helpful, but none of them are accurate alone. However, when you use a business forecasting software, you gain access to adanced data-driven reporting that takes all of these methods into account to produce the most accurate forecasts possible.

Choose Avercast!

It’s important to choose the right forecasting software for your company. Avercast provides a plethora of software solutions in our supply chain management software suite. Our software allows you to forecast demand, sales, revenue, and inventory for up to 5 years in the future.

Using 208 advanced algorithms, our software conducts 'what if' analyses to generate accurate forecasts for your business. With Avercast, you can manage your demand and maximize your sales in due time. It's the best forecasting software out there.

Contact us for a free call or demonstration!

Avercast offers the best supply chain software. For years we’ve serviced companies of all types and sizes. We provide our users with extensive forecasting solutions.