How to overcome common challenges in demand forecasting
Somewhere in the world, there are hundreds of thousands of unsold Snapchat Spectacles sitting in a warehouse. Launched in late 2016, the Spectacles are a pair of sunglasses with cameras built in to the hinge—designed to give the user a convenient way to record hands-free, point-of-view footage. Yet despite initial excitement and significant marketing investment, Snap was only able to offload half of its Spectacles inventory.
In hindsight, the reasons for this misstep are clear—several internal and external factors, such as holiday impact, customer data, and other influencers weren’t considered. In a constantly changing world, manufacturers must solve ever-increasing challenges, as old ones evolve and new ones arise. Let’s take a closer look at three common challenges manufactures face when forecasting demands.
Challenge 1: Using separate legacy systems to track customers and business
Most manufacturing companies have built out their operations over time, deploying systems as they need them or as they have become available. This often means manufacturers have one system for their ERP and another for their CRM. This approach solved the incremental needs of companies, but with digital transformation driving the need for interconnectivity, it is now a barrier in two ways. First, it leads to duplicative information in both systems, creating a siloed approach that impedes efficiency. Second, having this approach makes it difficult to get insights from disconnected data sets. Without integrated systems that talk to each other, many manufacturers miss the opportunity for enhanced insights or augmented operational processes.
Challenge 2: Applying the wrong methodology when making strategic decisions
Manufacturers are also making strategic decisions by setting goals for the company at large rather than for specific regions. This focus on performance as a whole does not give manufacturers visibility into where growth is needed or expected. It also fails to identify which regions overperform in difficult markets, and which ones underperform against easy regional targets. Even those who are looking at the right data might eschew it in favor of gut instinct, which generally misses paradigm shifts in the economic landscape. While industry knowledge or experience generally helps with knowing the ups and downs, even the most seasoned veteran cannot take all the variables into account. Reliance on gut instinct is no longer enough in the face of the rapid digital transformation occurring within the industry.
Challenge 3: Leveraging “incomplete” datasets to forecast next steps
Finally, manufacturers are not able to leverage customer profiling segmentation or external data effectively. Segmentation reveals what customers want in greater detail, enabling companies to understand demand better. Digital capabilities make it possible to distinctly segment customers, but most companies rely on demographics from market research or past experience. Similarly, external data is key yet underutilized. Everyone uses internal sales data, estimates, and historical data to help increase the accuracy of their forecasting, but this leaves out key variables. When quarterly performance yields missed targets, leaders often cite external circumstances that acted upon the economy to make the projections miss the mark. Bringing in external data can help businesses increase the accuracy of their forecasts by accounting for the external forces that were previously overlooked. However, manufacturers typically lack reliable access or the capabilities to use this data effectively. To overcome this and other challenges, leading manufacturers are leveraging a gamechanger in demand forecasting.
Take your demand forecasting to the next level with Prevedere
Prevedere, Built on Microsoft Cloud technology offers a solution that improves demand forecasting for any business by augmenting existing processes or acting as a standalone insights engine. The solution leverages an always-on predictive engine and access to industry experts, economists, and data scientists to deliver clear and actionable insights built for the business user. With these capabilities, Prevedere empowers businesses to validate their business strategies, discover hidden performance drivers, gain a 360-degree view of demand, and optimize ROI on operational spend. Try the demo on Microsoft AppSource today.
