Importance of Demand Planning & Forecasting for D2C Businesses

The demand for a particular product can rise suddenly at a specific time due to some marketing promotion, a shift in market condition, or seasonality. Thus it is important that you include all the information correctly to estimate the demand accurately and incorporate all this information into the demand forecasting model. Demand forecasting has a significant impact on your D2C business. With proper demand planning and forecasting, you would be able to comprehend precisely what to produce, how many quantities, and when to place an order for replenishment. With the integration of Artificial Intelligence, product availability can be improved.

Statistical forecasting may not always provide correct results as several external factors influence demand, such as weather conditions, commodity prices, market indices, and other factors. Demand forecasting software integrated with AI and ML algorithms can obtain data from external factors, examine them and generate accurate forecasting reports.

Challenges Faced by D2C Businesses in Demand Forecasting

One of the foremost challenges that businesses encounter is demand volatility. Enhanced data availability has made forecasting more complicated, and customer buying habits also modify constantly, making it challenging to determine and estimate demand trends. Various factors impact demand ranging from weather fluctuations to promotions and customers constantly.

Businesses have conducted demand forecasting for several years, and it only includes a simple statistical process related to the organization’s commercial results and  all the data received is not leveraged correctly.

Traditional demand forecasting is less precise as it consists of a manual approach involving spreadsheets to examine the data. Businesses must not depend on traditional forecasts as it rarely generates accurate forecasts and does not consider all the factors influencing demand. Traditional forecasting only incorporates past sales data. Modern times, the process has developed to include more business aspects and facets.

D2C businesses have various sales channels for selling goods such as their online website, partners, stores, and marketplaces and it is difficult to predict demand across all the channels for each SKU item accurately by considering the different factors that influence demand.

D2C brands require precise demand forecasts for every SKU unit in their inventory to satisfy demand at the right time. To obtain this level of accuracy, companies should adopt big data analytics and predictive analytics to anticipate the proper amount of inventory required.

What is Demand Forecasting?

Demand forecasting for D2C businesses predicts the consumers buying patterns related to a specific product at a particular time and area. Demand forecasting software allows companies to create an advantageous situation for themselves and their customers. It assists businesses in obtaining control across the entire supply chain, financial planning, and customer success management.

Demand forecasting inspects the current data to predict future events and sales to satisfy consumer demand accurately. It also examines the buying behavior of customers. Demand forecasting is one of the priorities businesses should focus on for functioning and operating successfully. D2C businesses cannot meet the fluctuations in demand and prepare for the ever-changing market conditions without accurate demand forecasting.

Importance of Demand Forecasting at the Granular Level

In today’s technologically advanced world, D2C companies require accurate forecasts across multiple channels at the granular level i.e SKU*channels. They need to store the correct amount of inventory at every location in the network across the distribution chain to satisfy demand, streamline inventory and pricing decisions, and maximize profit. It is impossible to predict demand with 100% accuracy, but businesses need to be as accurate as possible with all the available data.

By integrating machine learning and artificial intelligence into a robust demand forecasting software businesses can monitor the modifications in the demand side and match it with the supply part thus improving efficiency.

Forecasting demand is necessary because of the endless competition in the market and the complication of the supply chains. It also assists in data-driven decision-making for buying products from suppliers, enhancing production, allocation, and replenishment abilities. Various levels of granularity help in stocking the optimal amount of goods along the entire supply chain. Businesses can also look at the different time frames, including hourly, daily, weekly and monthly forecasts. It can help businesses to attain a competitive advantage. Granular level forecasts help retailers reduce safety stock and avoid spoilage and wastage by enhancing sales and improving customer satisfaction.

Businesses can derive the following benefits from efficient demand forecasting software:

• Boost sales with an optimally stocked inventory. They can meet sales targets at the right time. Stockouts result in lost sales that can be avoided with accurate forecasting.
• Demand forecasting software lets businesses know when to attract customers with discounts and when to increase the prices of the products in demand.
• Forecasting can assist businesses in knowing the staff requirement beforehand and arranging the staff accordingly.
• If accurate forecasts are not generated, then situations of overstocking might arise, which locks up resources in dead inventory. It also leads to wastage as the expiry date of fresh products gets over.
• Demand forecasting allows businesses to maintain higher product availability as with prior forecasting of demand, you can maintain the optimal amount of stock in the inventory and satisfy consumer demand at the right time. Thus, customers can be satisfied and brand loyalty can be increased.

A demand forecasting software enables D2C brands to predict forecasts accurately, order, refill and allocate resources accordingly. The workforce can be planned, and the capacity management functions can be optimized.

About Fountain9

Fountain9 assists D2C businesses in accurately forecasting demand for the upcoming months with their AI-powered demand forecasting software, Kronoscope, which considers 9 unique factors for predicting demand accurately. D2C businesses can stock inventory to an optimal level for satisfying consumer demand at the correct time with accurate forecasts. Businesses can keep their customers satisfied and delighted by fulfilling orders promptly. The robust and efficient software integrates planning with forecasting, capacity, and inventory planning functionalities. D2C businesses can get a lower cost, improve product assortment, and offer faster delivery.