This article will provide you with a general overview of what business forecasting software is, what forecasting in business is, and how it can work to benefit your company. When we use the term “business forecasting” we can be referring to multiple things. There are many different types of business forecasting systems including sales forecast, a prediction of the upcoming sales figures. Inventory forecasting, the process of forecasting how much inventory you will have to know when you will stock out of something or overstock something. Capacity planning, the ability to predict your workload and subsequently predict the type of employees and how many of them you will need to complete the task. demand forecasting, forecasting what the demand for the product will be for a combination of the benefits of inventory forecasting and sales forecasting. And there are even some others that we will not get into in this article.
Unless you are part of a large multi-national corporation, you may not have need for every one of the business forecasting systems on the market. We will break down each of them and their benefits to help you answer the question “What is forecasting in business?”
The first type of business forecast systems we mentioned was sales forecasting. As previously stated, sales forecasting allows you to know how much you will sell in the upcoming sales periods. This is useful because it allows you to identify your slowest moving and top-selling products and then create a further analysis to determine how to optimize your inventory by having the best products take up the most room in your warehouse and the slow-moving products take up only a small section. Business forecasting systems that use sales forecasting tend to take the historical sales data of your products and plug them into forecasting algorithms to then generate a forecast. These algorithms look for seasonality, trend projection, moving averages, and more forecasting methods within your data to generate the most accurate forecast possible.
Similarly, to sales forecasting, the business forecasting systems that include inventory forecasting allows for an optimization of your inventory. Rather than focusing on the sales, inventory forecasting system focus on the actual amount of inventory taking up physical space in a physical location. Inventory costs can become extremely expensive in certain situations where you may not have enough inventory on hand to meet the demand, or you have too much of lesser product (either with lower-margins or lower sales) taking up too much space in place of your valuable products. Inventory forecasting allows you to know how much of each product you need to have on hand at each location so that you are not stuck in one of the costly situations explained above.
Demand forecasting is very similar to those two tools and take the data from each to have a complete planning tool. Demand forecasting, also known as demand planning, takes sales into account, inventory into account, your budget into account, each product into account, each location into account, and generates a forecast that compiles this information together and shows how they affect each other. This business forecasting tool is extremely valuable though it can tend to be on the higher end of the cost spectrum compared to the others when all that is included is taken into account.
The next of the business forecasting systems is capacity forecasting. Capacity forecasting analyzes your workload and your work force and creates a harmonious balance between the two so that you don’t end up in a situation where you have too many employees and cannot afford to pay them all, or too few employees that are constantly decreasing in productivity due to a constant increase in workload. Capacity business forecasting also takes length of employee time into account. Certain systems can even make recommendations about how many people to hire for a specific project or client and how many of those people you should keep on as full-time employees vs. how many of those people you should hire with a contract so that they can be cut loose once their workload for a project has been completed. There are certain capacity business forecasting systems that take data from each industry and similar projects so that you can have the most accurate workforce to workload possible.
As you can see, all of these busines forecasting systems have their benefits and will each likely help in your quest to optimize inventory, enhance your supply chain, and increase savings and revenue. That being said, you should not invest in one of these busines forecasting systems if you are not ready. Many business forecasting software companies provide a breakdown of cost per features used so that you do not have to pay for a tool you are not yet using. It is important to look at how much you are predicted to save in advance and run your own cost/budget analysis to determine if you are at the level where one of these systems may be useful.
You should also consider looking at a company that can grow with you. If a company is very affordable and has what you need, but does not have what you may potentially need in the future, you might want to consider a business forecasting system that allows you to pay for what you need now and that you will be able to upgrade with when your business has grown to the level where one of those more complex features will be useful. You can save a lot in training and support fees by sticking with the same company long-term so taking some time to make a decision about which business forecasting systems you want to implement both now and in the future is important to your success.
Every solution has something to offer and tends to have a specialty, we wish you luck on your quest to analyze all of the business forecasting systems on the market and determine which will be right for your business!