Increase Your Competitiveness with Demand Forecasting
In a fully globalized, complex, and changing economic environment, it is essential to fully leverage all options for improving business performance to remain competitive. This is especially true in economically challenging times, like those we are currently experiencing, which have arrived abruptly, stemming from a crisis no one could have imagined just over a year ago.
New technologies are key to process optimization. Artificial intelligence, data science, and the Internet of Things (IoT – IIoT) allow us to develop, among countless tools applicable to any sector of activity, predictive systems that increase operational efficiency, simplify decision-making, achieve more profitable growth, and higher returns on investment.
Let’s take an example to illustrate our point. In our years of experience implementing demand forecasting tools, specifically Purchases, the one we have developed and know best, we have found that stock reductions of 15% are achieved in the first phase of implementation, and the purchasing process can be streamlined by up to 80% in terms of time. The data is undeniable: predictive systems, in this case for demand, primarily enable the optimization of the warehouse management process, and by extension, the entire supply chain. Knowing in advance what sales we will have in the coming months improves the planning of production, purchasing, logistics, transportation, and more.
Let’s return to the data. A 15% reduction in stock translates into a significant decrease in immobilized capital, the freeing up of warehouse space, and the reduction of obsolescence risk for references to minimal levels, which again contributes to economic benefit by eliminating losses. If we consider the 80% streamlining of the purchasing process, we find benefits such as gaining more time to dedicate to analysis and decision-making, rather than to purchases themselves; the reduction of administrative tasks; or the increase in customer service levels, allowing customers to obtain desired products more quickly, even with price reductions, due to the increased profitability we have already mentioned (reduced risks, immobilized capital, greater negotiation capacity with suppliers, etc.).
How are these benefits achieved?
The answer lies in data exploitation and the application of Artificial Intelligence. Every company generates thousands of data points daily that can now be collected, processed, and transformed into useful information for decision-making under a data-driven philosophy.
The capture of data (historical activity, work calendars, meteorology, supplier lead times, etc.) and its conversion into sales predictions make it possible to base business activity on the present and future reality of the demand for the company’s products or services, rather than on estimates based on team beliefs, intuition, or experience, as was previously done. This represents a significant leap from assuming to knowing, eliminating uncertainty in the decision-making process and errors in operations.
With the implementation of demand forecasting systems, forecasts of items to be sold within a certain timeframe are available, simplifying tasks across the entire supply chain, starting with the Purchasing department’s management. In other words, a 360º sales-warehouse-purchasing view is achieved, where these are no longer isolated units, gaining efficiency, while processes are automated with parameterized alert systems and the issuance of purchase suggestions.
At this point, returning to the data, having forecasts of future events and the demand for our items allows for a 15% reduction in stock during the first phase of implementation and an 80% streamlining of the purchasing process (data based on the experience of implementing Purchases). Additionally, it leads to overall process improvement and better customer service, resulting in increased efficiency and profitability, thanks to the elimination of unnecessary costs and risks.