What Is Demand Forecasting?

Demand forecasting, also known as sales forecasting, refers to the process of making estimates about future customer demand over a certain time period. It uses historical data along with other information.

Reasons Why Demand Forecasting Matters

With sales forecasting, businesses have information to assist with planning, goal setting, and budgeting. With a good understanding of what your future sales may look like, it’s possible to build and inform procurement strategy to ensure your supply matches customer demand, at the specific product level.

Organizations can more effectively optimize their inventory levels, increase inventory turnover rate, and reduce holding costs.

With sales forecasting, businesses are also able to identify and rectify any issues in the sales pipeline ahead of time to keep business performance studies throughout the entire period. In terms of inventory management, most e-commerce business owners know that too little or too much inventory can be detrimental to operations.

Demand forecasting provides insight into your upcoming cash flow so businesses can more accurately budget payments for suppliers and other operational costs, while still investing in the growth of the business.

Anticipating demand means knowing when to increase staff and allocate other resources to ensure operations run smoothly during peaks in activity periods.