Investing heavily little results
Many organizations invest heavily in forecasting models and yet results lag. Inventory does not match demand, decisions are made ad hoc, and profits lag. The cause? Not the data, but the lack of the right approach. Models are built, but rarely really aligned with practice.
Why is demand forecasting so important?
The better you can estimate demand, the better you can adjust your inventory accordingly. The right inventory levels are crucial to a well-functioning business. Without a good understanding of why demand develops the way it does, forecasting remains a guess with a fancy sauce of statistics. In the airline industry, where margins are small and millions are tied up in inventory, we saw this up close. Too much inventory leads to capital loss, too little to downtime. Finding the balance requires more than a model: it requires the right techniques, tailored to the business.
The solution
For our client in aerospace, we developed a demand forecasting model that forecasts the demand for products for sale, repair and maintenance over 12 months.
We tested four state-of-the-art forecasting techniques to arrive at the best approach, want to read which four they are and how we did it? You can read it in the blog: Demand Forecasting with State of the Art Forecasting Algorithms.
The result
The combination of these techniques yielded concrete gains:
- Fewer ad hoc decisions;
- Lower inventory levels without delivery risk;
- Greater confidence in numbers through transparent ranges.
The client got a grip on demand patterns and can back up decisions with data instead of assumptions.
Demand forecasting for growth
Demand forecasting is no longer a theoretical exercise, but a strategic management tool.
With the right algorithms, geared to the reality of the organization, you transform demand forecasting from a black box into an engine for growth.
Demand forecasting is not only relevant to aviation or manufacturing, for example. In retail, it also helps reduce waste through better inventory management, and in the energy sector, for example, it ensures more stable planning and lower operating costs. In short, wherever supply and demand need to meet, forecasting can make a difference.
Want to know which forecasting approach provides the most value for your organization?
We are happy to engage with you. Easily schedule a 30-minute call here.
