Importance of forecasting in business planning

Share on Facebook Sales forecasting is a key element in conducting your business. The realism that good forecasting provides can help you develop and improve your strategic plans by increasing your knowledge of the marketplace.

Importance of forecasting in business planning

Tweet What are the goals of business? From a supply chain perspective, how do we accomplish this? We know how important our demand planning function is to ensuring operations are timely, efficient, and cost effective.

We want to ensure product availability to maximize revenues in the marketplace but also know inventory is a tradeoff as it ties up capital. Effective demand planning then requires a variety of information timely, as accurate as possible, useable, qualitative and quantitative in order to properly forecast the products we sell.

We are usually forecasting independent and possibly service parts demand but all types of demand have to be planned for in our supply chain processes to ensure availability when needed. One of the top pain points is demand volatility. In general, the more we know about the demand for our products, the better our forecasts will be.

For example, the bullwhip effect creates demand volatility that becomes amplified as it moves through the supply chain. While this can be a big problem, it is also an opportunity for collaboration and information sharing, two ways to ensure a better understanding of what your demand really is.

Of course, depending on the individual company, there may be additional questions that need to be answered. For example, a company consistently over forecasts several large product lines, leading to increased inventories and lower inventory turns.

Time Series Analysis for Business Forecasting

While the company may or may not view this as a problem, the demand planning process can aid in understanding what the inventory goals should be and why, as well as what an appropriate forecast should be through ongoing analysis and tracking of the forecast.

They must be integrated into other aspects of operations in order to provide value. It also links strategic plans to operational plans, and attempts to develop the most desirable product portfolio and product mix to maximize sales and profit.

We still need to balance our demand with our supply capabilities.

Business Forecasting and its Importance to Business

Manufacturing needs to know what product to make, the quantities to make, and the timing of when it is needed. The supply side tells us what our capacity and capabilities are to ensure these needs can be met. Understanding those capabilities allows us to shape our demand to more closely match our supply.Business Planning and Forecasting Forecasting is an important input to enterprise planning and strategy formulation.

Forecasting and planning are inter-related. Understand How Demand Planning and Forecasting Tie Into S&OP. Demand planning and forecasting are not stand alone processes.

importance of forecasting in business planning

They must be integrated into other aspects of operations in order to provide value. Forecasting is a common statistical task in business, where it helps to inform decisions about the scheduling of production, transportation and personnel, and provides a guide to long-term strategic planning.

The importance of strategic planning is in the small number and the long term impact of the decisions embodied in the strategic plan. This research examined 44 aspects of job satisfaction and 38 factors directly related to employee engagement.

Among the topics explored are career development, relationships with management. May 23,  · Also as important as creating a great forecast is putting together a contingency plan, or “Plan B” for what the company will do in case forecasts aren’t made. The truth is that at times, forecasting is as much an art as it is a science.

Timeline of 50 Years of Supply Chain at Walmart