The missing piece in accurate demand forecasts
Anyone who has sat on the board of a manufacturing company has experienced this—a report is brought up during the weekly staff meeting highlighting the risk for missing monthly targets. This throws the meeting agenda off course, triggering a room-wide debate. Speculation and anecdotes surface to try and explain the report. This common internal churn scenario is likely due to the company not considering how external factors could suddenly affect the business, even after thoughtful forecasting and careful decisions making. More often than not, it’s the external factors—changes in consumer spending, population trends for growth and location, and attitudes towards large purchases—that have a significant impact on quarterly performance.
Without hard facts from accurate data, manufacturers frequently struggle to explain or change forecasted performance, whether it was positive or negative. And while manufacturers might feel they are missing part of the picture, demand forecasting technology is unlocking the missing piece by combining previous performances with external factors to better refine demand forecasts. A data-driven approach prevents gut feelings or anecdotes from influencing demand forecasting, and shows that predicting the future just might be a possibility. Let’s focus in on the automotive industry to show just how valuable data-driven insights can be.
The current state of the automotive industry
Since the federal government bail-out of the American automotive industry in 2008, car manufacturers have enjoyed record car sales. Relying solely on anecdotal feedback, or gut feelings, it would follow that these strong sales would only continue as the US economy also recovered. Projected forecasts showing strong demand would continue as companies look to take advantage of the trend.
But a deeper look would reveal a different story. Prevedere, a game-changer in the demand forecasting business, leveraged their patented analysis engine and industry experts to identify several factors that weren’t readily apparent from a cursory glance. In their findings, Prevedere determined that the auto industry has exhausted every available opportunity to bring in new consumers. Low interest rates (from federal programs, competitive rate programs by banks, or subvention programs by OEMs), longer care life from government mandated higher fuel efficiency, and an increase in auto loan delinquency rates from longer auto loan have converged to reshape the automotive industry in the US for 2018.
From these insights Prevedere developed three takeaways for the automotive industry in 2018. The first is that despite strong historical sales since 2008, demand for cars will be less in 2018 due to market saturation. Second, auto dealers must get the full value out of every sale and cannot afford to incentivize customers through promotion. Finally, marketing campaigns will most successful by focusing on baby boomers who have continued wage growth, disposable income, and still value having expensive cars.
Such detailed data-driven insights illustrate the tremendous value that manufacturers can leverage, and shows why gut feelings should not influence forecasting reports.
Achieve more accurate forecasts
The detailed analysis on the automotive industry is just one of many ways Prevedere is providing more accurate insights for better forecasting accuracy. Prevedere, Built on Microsoft Cloud technology, has partnered with Microsoft to provide actionable data-driven insights at the speed of business. Using Microsoft technology their patented analytics engine combines external global factors with internal company performance to provide:
- Validation of a company’s current strategy
- Discovery of hidden performance drivers
- A 360° view of future demand
- Optimized ROI on operational spend
To learn more about Prevedere, try the demo on Microsoft AppSource, or contact a Microsoft representative today.