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How Demand Forecasting Can Boost Business Efficiency

The art of predicting the future is nearly as old as civilization itself. Oracles, fortune tellers and soothsayers of all kinds have long claimed to be able to see the course of future events, and they’ve often found a receptive audience in humans who want desperately to know what’s just around the corner.

These days, of course, the world has more scientific and data-based methods available. The business community, in particular, has embraced what has come to be called Big Data: the practice of taking the mountains of information that businesses accumulate and putting it to work. One of the most widely-used applications of Big Data is the practice of demand forecasting, in which analysts attempt to understand what customers will want next by understanding what they’ve wanted in the past.

What kinds of methods do businesses use to perform these calculations, and what goals do they typically want to accomplish? Perhaps most importantly, how can they improve their accuracy and make them a smart use of resources?


 
Basics of Demand Forecasting

Businesses of all kinds use demand forecasting to estimate future demand for their goods and services. A basic primer on today’s demand forecasting methods begins with the difference between each major type of forecasting:

  • Short-Term Demand Forecasting: Focuses on customer demand within several months to a year and how best to prepare ordering and shipping practices for seasonal demand cycles and approaching campaigns.
  • Mid- to Long-Term Demand Forecasting: Focuses on strategic deployment of resources to meet anticipated customer demand in the next one to five years.
  • Active Demand Forecasting: A more intensive technique used to evaluate how aggressive plans for expansion and scaling will interact with consumer demand.
  • Macro Demand Forecasting: The “big picture” demand forecasting technique that looks ahead at broader market conditions to help plan a business’s overarching strategies.

Beyond that, there are two broad categories of methods that each type of forecasting can employ. Many businesses use both, combining techniques to achieve better results:

  • Qualitative Forecasting: Uses methods that focus on opinion and consensus, such as market research and the Delphi method, to arrive at a reasoned conclusion.
  • Quantitative Forecasting: Uses statistical techniques and computer modeling to crunch the hard numbers and create a data-intensive picture of future demand.

Businesses use all kinds of tools and technologies to implement these methods, from relatively simple research surveys to complex data modeling tools. That’s certainly a big investment—so what, exactly, do these methods achieve?

Why Demand Forecasting Is Important

Most businesses consider demand forecasting to be critical for achieving a better deployment of resources. The individual goals that each business hopes to achieve through demand forecasting are as diverse as individual business plans, but there are some common themes:

  • Optimizing Inventory: In a business climate where warehouse space and fulfillment capacity are perpetually at a premium, it’s essential to ensure that valuable space and logistics resources aren’t being wasted on inventory that does not create value.
  • Improving Cash Flow: By the same token, it’s important that businesses keep their cash flow situation agile and not over-allocate resources to projects that aren’t aligned with market conditions.
  • Serving Customers Better: Whether it’s disposable consumer goods or high-end B2B services, every business wants to give its customers what they want. Accurate demand forecasting helps to improve customer satisfaction by ensuring that supply matches demand as closely as possible.

Obviously, there are some excellent reasons to implement demand forecasting—assuming that it works. All too often, though, businesses experience frustration with inaccurate forecasting. Thus, the relevant question becomes: How can forecasting be implemented in a way that provides solid ROI and improves efficiency, rather than simply prognosticating?


 
How to Boost Efficiency Through Better Demand Forecasting

Nearly every large- or medium-sized business today uses some form of demand forecasting, and thanks to the advent of affordable cloud-based ERP software, it’s more easily available than it’s ever been. However, to improve the accuracy and efficacy of demand forecasting, it’s important to implement some best practices used by the top forecasters in business. Although there are many ways to do demand forecasting right, these key tips can help a business get more out of their investment in the practice:

  • Remember that demand is not monolithic and try implementing a disaggregated model. Break down demand by demographics, product lines, regional differences and any other statistical segments that matter. Again, the powerful reporting features available in many distribution software products can help establish what these segments are and how they can be separated.
  • Focus resources not just on forecasting demand itself, but in determining the variability of demand forecasts. A forecast with a five percent margin of error and one with a 20 percent margin of error can both be useful, but building a business plan around a high-variability forecast is much more risky. Uncertainty will always be present, so a smart business will take steps to identify just how much uncertainty is present and allocate resources more or less flexibly based on that understanding.
  • Use automated systems to monitor how a demand forecast is matching up to actual expressed demand. Collaborate with data experts to identify breakpoints at which divergence will require revision of demand models and then set up alerts at those points. Many modern manufacturing ERP systems allow for sophisticated real-time modeling of demand that allows this kind of rolling analysis to take place.
  • Diversify forecasting methods. No one approach can capture every element of a system as complex as market supply and demand, so try out a variety of models and evaluate their accuracy using the previously discussed principles such as real-time monitoring and variability forecasting.


 
Planning for the future is a key part of any business, and demand forecasting is now an indispensable tool for making that planning useful and effective. So, although tools, techniques and goals may vary, one thing is clear: Establishing a forecasting system and evaluating its efficacy should be high-priority goals for a business that’s trying to grow, compete and innovate.

The Big Picture of Business – Each Role Matters. The Value of Support Staff

StrategyDriven Big Picture of Business ArticleEvery person in the company matters to its success. Every job is important, as is filling them with the best people for each job. The art and skill of being great support staff is a cornerstone of business success.

From pop culture, think of the great role models that we grew up watching:

Della Street was the loyal secretary to Perry Mason. She knew what everyone was thinking and was the glue to the cases. She was the model for executive assistants and office managers everywhere.

The CEO is made stronger with a good C-suite team. Ed McMahon was TV’s premier second banana. He worked as assistant, announcer, commercial pitchman and sketch narrator to Johnny Carson throughout their 29-year run on NBC-TV’s “Tonight Show.” They had previously worked together on a game show, “Who Do You Trust” on ABC-TV. Bandleaders on the late-night are vital #3 characters on the show, including Doc Severinsen, Skitch Henderson, Paul Shaffer and The Roots band.

The movie star heroes had buddies to help them navigate the adventures. John Wayne and Roy Rogers had Gabby Hayes. Gene Autry had Pat Buttram.

TV show stars had great support casts. Lucille Ball and Desi Arnaz had Vivian Vance and William Frawley as Ethel & Fred Mertz. This historic teaming became the formula for most other TV sitcoms. Shows like “The Mary Tyler Moore Show,” “30 Rock,” “The Office” and others had expanded ensemble casts.

Some performers made careers as supporting players. Ann B. Davis was Schultzy on “The Bob Cummings Show” and Alice on “The Brady Bunch.”

Back characters on TV shows included restaurant and bar operators, where the stars went top relax. There were friendly, familiar places such as Cheers bar, Arnold’s Drive-In on “Happy Days,” the Krusty Krab on “SpongeBob Square Pants,” Dale’s Diner on “The Roy Rogers Show” and other homey places. In the business world are those staff people who make us feel more like family. Therefore, our loyalty to the company rises, and we are more productive.

Still other back characters bring cohesion to the enterprise. On “Gilligan’s Island,” those glue-adhesive characters were the Professor Roy Hinkley and Mary Ann Summers. Those vital employees in the business world might include the IT guy, the receptionist, the mailroom manager, the ethics adviser and the secretary to the Board of Directors.

Great executives know the value of crediting support figures for the business success. Lt. Columbo was always quoting his wife as basis for testing hypotheses, though the character was never shown. Newspaper publisher Perry White was always upstaged by his employees, notably Clark Kent/Superman. Al Roker does the weather on “The Today Show,” and he is also the motivating segment host as well. Nobody turns letters like Vanna White, making her essential to the legacy of “Wheel of Fortune.”

And then there were those mentors behind the scene who were responsible for lots of creativity. The Beatles had George Martin as their producer. Steven Spielberg had John Williams as music composer for his films.

A host of people make the CEO look good. Further, they transform the company to greater plateaus. Warmly recognize the contributions of executive assistants, trusted advisers, mentors, support staff, hier apparents, adjuncts, vendors and outside stakeholders.

Here are some characteristics of support personnel and rising stars who will make it as professionals and business leaders:

  • Act as though they will one day be management.
  • Think as a manager, not as a worker.
  • Learn and do the things it will take to assume management responsibility.
  • Be mentored by others.
  • Act as a mentor to still others.
  • Don’t expect status overnight.
  • Measure their output and expect to be measured as a profit center to the company.
  • Learn to pace and be in the chosen career for the long-run.
  • Don’t expect that someone else will be the rescuer or enable you to cut corners in the path toward artificial success.
  • Learn from failures, reframing them as opportunities.
  • Learn to expect, predict, understand and relish success.
  • Behave as a gracious winner.
  • Acquire visionary perception.
  • Study and utilize marketing and business development techniques.
  • Contribute to the bottom line, directly and indirectly.
  • Offer value-added service.
  • Never stop paying dues and see this continuum as “continuous quality improvement.”
  • Study and comprehend the subtleties of life.
  • Never stop learning, growing and doing. In short, never stop!

About the Author

Hank MoorePower Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.

Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.

Power Stars to Light the Business Flame is now out in all three e-book formats: iTunes, Kindle, and Nook.

The Big Picture of Business – Ethics… Good for Business

StrategyDriven Big Picture of Business ArticleIn order to succeed and thrive in modern society, all private and public sector entities must live by codes of ethics. In an era that encompasses mistrust of business, uncertainties about the economy and growing disillusionments within society’s structure, it is vital for every organization to determine, analyze, fine-tune and communicate their value systems.

Corporate Responsibility is more than just a statement that a committee whips together. It is more than a slogan or rehash of a Mission Statement. It is an ongoing dialog that companies have with themselves. It is important to teach business domestically and internationally that:

  1. We must understand how to use power and influence for positive change.
  2. How we meet corporate objectives is as important as the objectives themselves.
  3. Ethics and profits are not conflicting goals.
  4. Unethical dealings for short-term gain do not pay off in the long-run.
  5. Good judgment comes from experience, which, in turn comes from bad judgment.
  6. Business must be receptive–not combative–to differing opinions.
  7. Change is 90% beneficial. We must learn to benefit from change management, not to become victims of it.

Corporate Responsibility relates to every stage in the evolution of a business, leadership development, mentoring and creative ways of doing business. It is an understanding how and why any organization remains standing and growing…instead of continuing to look at micro-niche parts.

Integrity is personal and professional. It is about more than the contents of a financial report. It bespeaks to every aspect of the way in which we do business. Integrity requires consistency and the enlightened self-interest of doing a better job.

Financial statements by themselves cannot nor ever were intended to determine company value. The enlightened company must be structured, plan and benchmark according to all seven categories on my trademarked Business Tree™: core business, running the business, financial, people, business development, Body of Knowledge (interaction of each part to the other and to the whole) and The Big Picture (who the organization really is, where it is going and how it will successfully get there).

One need not fear business nor think ill of it because of the recent corporate scandals. One need not fear globalization and expansion of business because of economic recessions. It is during the downturns that strong, committed and ethical businesses renew their energies to move forward. The good apples polish their luster in such ways as to distance from the few bad apples.

Corporate Responsibility means operating a business in ways that meet or exceed the ethical, legal, commercial and public expectations that society has of business. This is a comprehensive set of strategies, methodologies, policies, practices and programs that are integrated throughout business operations, supported and rewarded by top management.

Corporate Sustainability aligns an organization’s products and services with stakeholder expectations, thereby adding economic, environmental and social value. This looks at how good companies become better.

Corporate Governance constitutes a balance between economic and social goals and between individual and community goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for community stewardship of those resources.

As part of strategic planning, ethics helps the organization to adapt to rapid change, regulatory changes, mergers and global competition. It helps to manage relations with stakeholders. It enlightens partners and suppliers about a company’s own standards. It reassures other stakeholders as to the company’s intent.


About the Author

Hank MoorePower Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.

Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.

Power Stars to Light the Business Flame is now out in all three e-book formats: iTunes, Kindle, and Nook.

Implementing an Organizational Performance Measures System

StrategyDriven Organizational Performance Measures eBookGET THE FREE EBOOK…
 
Learn how to develop and implement a performance measures system that drives superior performance by aligning managerial decisions and employee actions with your corporate strategy. With this FREE ebook, you’ll learn…

The Big Picture of Business – Wisdom From the Disasters, Recovery Through Compassion and Resilience

StrategyDriven Entrepreneurship ArticleThe month of September saw natural disasters. In times of crisis, people came together to help each other.

Forces of nature: from disasters came citizens with noble hearts and a willingness to serve others. Young people sought to help, thus inspiring lifelong commitments to community stewardship. The beacons of light came from caring people, corporate contributors and a spirit of goodwill.

Wisdom from hurricanes and natural disasters: Bring your hearts and your hands. The worst disasters bring out the best in caring, compassionate people.

Hurricane storms do not redefine who communities are… they make communities stronger. Volunteers are the glue to resilient communities. In rebuilding after hurricanes, don’t just build the way it was. When there are tragedies, there will always be helpers. Heroism emerging from Harvey and Irma.

The more we do for others, the more we feel the “potlache” of giving to others. Natural disaster stages: Warning, hit, search and rescue, recovery, rebounding, analysis, flood prevention planning, learning from crisis, community development.

Commit to a program of volunteering. Heart warming scenes of neighbors helping each other in disaster spark the passion of citizens to contribute further. Ongoing community needs for volunteers are supplied by Volunteer Houston: http://www.volunteerhou.org. This is the central contact, as they work with hundreds of non-profit organizations in the greater Houston area, ascertaining needs and scheduling volunteers. Volunteer Houston gave me their Lifetime Achievement Award two years ago. To volunteer statewide in Texas, OneStar Foundation is the coordinating entity: http://onestarfoundation.org.

Houston Strong motivational campaign launched. It embodies resilience, rebounding from disaster, teamwork and volunteer spirit. Other memorable campaigns have included: Houston Proud, Texas Cares, Clutch City, H-Town, The City With No Limits, Houston’s Hot, Magnolia City, Bayou City, Energy Capitol, Space City, Texas Sesquicentennial, Texas State of Mind, Don’t Mess With Texas, Spirit of Texas. There were classic radio jingles: “My Home Town” and “Sounds of the City.” And there was “Houston Legends,” my seventh book, a comprehensive city history that inspired community forums, volunteer recognition and nostalgia.

George R. Brown would be so proud that the convention center bearing his name would temporarily house flood victims. He was a community leader and would be warmly greeting the citizens if he were here today. I knew Mr. Brown in the 1960s and 1970s, first as friends of President Lyndon B. Johnson, then later serving together on charity boards. His favorite accomplishments included the establishment of intercity educational and daycare programs. He was born in Belton, TX, joined the U.S. Marines in World War I and co-founded the construction firm Brown and Root. Pictured, GRB and brother Herman Brown. GRB and LBJ.

There are 23,000 non-profit organizations in the greater Houston area, in action to assist flood victims and citizens in need. Many other cities are sending rescue vehicles, supplies and volunteers. Kudos to friends and community supporters. Volunteers are always to be thanked for their service. In crises and other times, neighbors help each other.

In recovery from the disaster weather crisis, it is important to honor volunteers for their service. The more we do, the more we feel the “potlache” of giving to others.

Realities of giving and charity:

  • Ego charities benefit the organizers.
  • Celebrities often get duped into promoting causes.
  • Charitable involvement is not a game or contest.
  • Most companies give to communities.
  • Cause-related marketing is a good thing.
  • Some companies use “philanthropy” as a marketing scam.

Best advice to You, the Humanitarian:

  • Give generously.
  • Pick causes about which you are passionate.
  • Serve causes which serve many.
  • Your time is your most valuable commodity.

We’re a very giving society and want to make a difference. Companies making donations should be recognized. Human caring and hours of their volunteer service are what matters most. After the crisis, many unsung heroes render glorious service behind the scenes, where it matters.

Love and respect to the humanitarians.


About the Author

Hank MoorePower Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.

Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.

Power Stars to Light the Business Flame is now out in all three e-book formats: iTunes, Kindle, and Nook.