The fastest and most effective way to be successful is with accurate projections. The best way to get hold of valid projections is through demand forecasting. The purpose of demand forecasting is to identify your business’s potential product or service demand. With more accurate data, you’ll be better prepared to make accurate pricing decisions.
Moreover, forecasting can also affect your business’s growth and market potential, which is why accuracy is important. There’s no use expanding into a specific market if there’s no profit there! Think of it this way: if you have fewer competitors, you can price higher, but only when demand is also high.
When entering a new market, forecasting can provide essential insights to help you make the best decisions. Much of this comes down to estimation, but all predictions come from raw facts. You can’t refute facts. So listen to them. You’ll be an astounding success for it. Learn how you can accurately forecast your company’s demand with Six Sigma.
Useful Forecasting Techniques
There are multiple different methods you can utilize when forecasting demand. In any business, it is typically the management and business owners that perform this role. Using historical data allows your higher-ups to identify demand for specific products and services. If demand points to something already in existence, simply take that product and deliver it to the customer. You can also use forecasting to recognize potential demand for new, different products. All you need to do then is use your findings to produce what customers want.
Similarly, test markets can prove highly beneficial when it comes to forecasting demand. Test markets are simply a type of micro-market, generally found in cities, that reflect the demands of larger markets. Look at your test market. Is the demand high? If so, this tends to suggest a similar demand in larger markets where your product will almost certainly perform well. The only way to know for sure is to try. And with strong forecasting to back up your decisions, you’ve nothing to worry about.
Why Forecasting Is Essential
For those new to forecasting demand, we can understand you may be skeptical. All we can say is, don’t be. The key to using Six Sigma to great effect is to open your mind to new ideas. Not every business responds well to Six Sigma ideas at first but is their resistance that causes such friction in the first place. Demand forecasting and estimation are key tools in Six Sigma businesses, both of which are integral to effective inventory management.
Remember, businesses like yours purchase inventory based on information gleaned from demand forecasts. Imagine you have a chain of grocery stores that increase their stock of items like ice cream in summer because past data tells them demand increases then. By neglecting to utilize accurate demand forecasting, you run the risk of failing to satisfy, if not exceeding, your inventory needs. More is not always better, and too much inventory can lead to significant losses. You will lose some items, particularly perishables, as their expiration dates pass by.
Moreover, too little inventory will have customers in uproar, leading to missed revenue opportunities. They may even turn away from you completely, losing value in the customers’ eyes. Once that happens, you’ll find it difficult to recover.