Demand Forecasting Software

Helping to effectively balance a retailer’s supply and demand, demand forecasting software is a must-have solution that can make or break a season(s). By minimizing inventory investment and increasing revenue opportunities, best-in-class demand forecasting software enables a look into the future; forecasting customer demand for new and current products and allowing for inventory level planning to meet demand, as well as creating the best possible replenishment orders. Demand forecasting tools can help you to minimize costly inventory errors and stock-outs.

An end-to-end process, demand forecasting is not a stand-alone activity. The fact is that actual customer demand needs to drive the entire business, as consumers today are more sophisticated, fickle and have many more options than just traditional brick & mortar – which used to be the only choice available. Now, consumers have the ability to compare prices on the web, research product availability at the click of a mouse or on their mobile devices and more. Therefore, it is imperative for companies to utilize a demand forecasting software solution that can help them to overcome these new challenges.

It’s critical to equip all parts of your organization with consistent and accurate demand forecasting information. Demand Forecasting software allows companies to share more information and work together on setting sales goals. You can easily view how close forecasts come to actual results and make adjustments in production and marketing as needed. With a single view of your overall plan it’s easier to manage your plan by store, SKU, region, product group, brand and more, which leads to better decision-making.

Using Demand Forecasting Tools to Drive Accurate Forecasts

Automating the creation of forecasts based on demand history - the goal of demand forecasting tools - produces the most accurate look into future demand. As each product is unique it needs to have the correct algorithm applied. This can become a very complicated task for retailers as SKUs multiply. Products are not all the same – some may have spikes in demand due to promotional activity, whereas others may be seasonal. These erratic-demand products need to have their demand history normalized; otherwise a retailer will encounter future over-stocks or under-stocks. There are also products that may have lost sales due to stock-outs which, when not accounted for, can lead to additional stock-outs in the future. With a demand forecasting solution, more accurate forecasts based on true demand can help organizations eliminate poor results such as lost sales, product obsolescence and overstocks – all that can equate to lower revenues and margins.

Demand Forecasting Software Helps Minimize Risk for New Product Introductions

demand forecasting tools

New product introductions are a necessary part of doing business for nearly all organizations. Consumers are always looking for fresh products and today’s competition is fierce. As important as new product introductions are, they also come with many risk factors. One does not want to make huge investments only to end up missing the mark. Failed new product introduction can result in unplanned promotions and excessive markdowns that can be very costly to the bottom-line. But how can you accurately forecast how a new product will perform when there is no demand history?

Companies need to create a plan of action based on how new products are expected to perform from a sales perspective through effective modeling techniques using demand forecasting software. The most basic of these techniques is replacement modeling - commonly called a Supersession. With this method an existing product is swapped out with a new product. While the existing product sells down, a retailer or distributor prepares to replace it with a new product and models the sales profile of the new product off that of the current product. The balancing act is making sure inventory of the existing product is appropriately reduced prior to the new product introduction to avoid cannibalization. Supersessions are more commonly used in the consumer packaged goods and high tech industries versus fashion-oriented ones because they require having like SKU’s. A proven technique for improving forecast accuracy for items that don’t have a sales history, Supersessions can be very effective.

For more fashion-oriented organizations, it’s very difficult to choose a precise item that a new product is replacing due to the fact that it may have many similarities to multiple existing items. That’s where profiling comes in for new product forecasting. Planners know their products and customers and are working to create the perfect assortments to match their customers’ needs. But, at the same time, they can’t think of every individual product and try to come up with a unique sales profile. That’s where best-in-class demand forecasting tools can help. Planners determine what existing products have similar attributes to the new product. A demand forecasting solution then builds a sales profile for the new product using the sales history of a group of similar products. The difference between this approach and supersessions is subtle. With a Supersession you know the exact product you’re replacing with the new product. With profiling, a group of products with similar attributes is used as the basis for the new product’s profile.

A Case Study in Demand Forecasting – Clicks

Challenge

Clicks, a South African-based health and beauty retailer with over 440 stores, is the leading retailer of its kind in the country. Its customers rely on the large selection of products to meet their health and beauty needs and continue to return for the value.

Clicks had been utilizing two different demand forecasting and replenishment systems: one within their warehouse management system that replenished stock from vendors to their distribution centers (DCs) and one within their merchandising system that replenished stock from the DCs to the stores. The problem with this approach is that they didn’t have one end-to-end forecasting and replenishment system. The two disparate systems were not demand-driven and were backward looking. In addition there was a lot of user intervention taking place to override the deficiencies of the systems.

The Solution

Meeting business objectives and driving more efficiency within the business meant that Clicks needed to revamp their processes and systems. They were confident finding the right solution would help them to improve their competitive advantage and ultimately increase sales and customer loyalty.

“We did look at some of the other large vendors in the marketplace, but for the most part they were very expensive and difficult to implement and use. Ultimately we selected JustEnough due to the fact that it was financially reasonable and quite easy to implement and use. The JustEnough Demand Forecasting and Replenishment solutions are part of JustEnough’s end-to-end retail planning solution, so there is a lot of potential to quickly and easily add additional functionality at a later time,” explained Simon Wills, Supply Chain Business Process Manager, Clicks.

Results

By implementing the JustEnough Demand Forecasting and Replenishment solutions, Clicks now has modern, automated, accurate, demand-driven planning systems. Clicks also now has the ability to forecast promotions into the future with the system automatically ordering stock from the vendors to the DCs and then moving the stock from the DCs into the stores to meet customer demand.

“We were expected to maintain target service levels and availability in our stores, but following deployment of the JustEnough solutions we actually showed an improvement between 1.5 and 3 percent. In some cases, we increased availability levels from 93 to 97 percent. It’s incredibly positive for us to see these results in such a short timeframe,” Wills concludes.

JustEnough Demand Forecasting Software

JustEnough Demand Forecasting helps you to be more responsive to customer demand through the use of sophisticated forecast modeling algorithms which create a forecast based on actual demand history. This automated demand forecasting tool uses forecast algorithms that create a baseline forecast by running a series of forecasting methods to drive the most accurate forecast for each SKU. JustEnough Demand Forecasting uses a tournament of best fit in which 14 best-in-class forecasting methods compete against each other to determine which one should be assigned to each SKU. These models are then compared to actual demand, finding the most accurate model and taking the guesswork out of the process.

Keeping up with seasonality and trends, JustEnough demand forecasting software incorporates seasonality and the year-over-year repeating patterns that are visible by weekly or monthly periods. The trends are captured by eliminating recurrent and periodic variations so that you won’t confuse seasonal variations as decay or growth. The system also takes into consideration promotional uplift. The history is normalized so that a future forecast will not include the results of a promotion that may not be run in the future.

In addition, lost sales due to stock-outs are accounted for to make sure similar lost sales will not occur in the future. Through management by exception, users can increase productivity, and manual overrides allow them to apply their unique business knowledge to the forecasts. The result of JustEnough Demand Forecasting is accurate, easy-to-use forecasts based on true customer demand.

Benefits of JustEnough Demand Forecasting

  • Minimized inventory and quicker inventory turns with increased customer service levels
  • Decreased stock-outs, overstocks and lost sales
  • Increased planner productivity with exception-based reviewing and automated plans for increased forecast accuracy

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