Too much money tied up in stock? Wasting perishables? Or are you overstaffed in slow times and understaffed when it’s busy? With accurate demand forecasting and planning, you can make better decisions about your daily business operations as well as your long-term growth. Here are our top tips.
The key to demand forecasting
There are a number of reasons why demand forecasting is important for your business. It gives you a clear picture of your cash flow, so you can budget for outgoings and plan around your income. It enables you to optimise your inventory, thereby increasing turnover and reducing carrying costs and waste. And it helps you schedule more effectively which saves you money and improves your customer service.
Some businesses, however, make the mistake of forecasting sales when they should be looking at demand. Take the example of occasional avocado shortages when wholesale prices go sky high and avo on toast becomes a premium item on menus. If you based your forecasting on sales, you’d assume there was little demand when the opposite is the case.
Demand forecasting and planning
Demand forecasting should be a key step in your planning, to ensure your business’s profitability in both the short and the long term. It enables you to manage and align your pricing, budget, demand, inventory, resources like staffing, and everything else that affects you delivering your product or service.
Short-run forecasts of three, six or 12 months give you valuable insights so you can make adjustments to keep your business running smoothly and financially on track. Maybe your margins on some products could be higher to improve your profitability, or Saturday mornings might not be as busy as you thought they would and you could roster fewer staff. Short-term plans also account for things like seasonality – perhaps you need to put on causal staff and increase inventory in the summer months?
Long-term demand forecasting, on the other hand, helps you make large capital and strategic decisions for your business’s growth, such as taking out a business loan to expand your premises or product line, or investing in new equipment.
Focus on inventory and staff planning
In any small business, it’s essential to control your inventory and staffing costs. Needless to say, inventory costs add up. They start with the initial purchase and usually include storage, servicing, handling and risk – things like electricity, refrigeration, labour to stack and pack, and potential spoiling or waste. Inventory management software like Xero, MYOB and Vend, which integrate with Deputy, give you real-time reporting so you can keep track of stock, bestsellers and profit margins so you know what and when to order, and the best price point.
And while staff are often the most expensive part of running a business, they are also vital to your customer service – too few and both their experience and your reputation suffer. You can make your staffing decisions more cost-effective by using employee scheduling software like Deputy, which enables you to roster according to demand. By allowing you to view shift costs and graph wages against expected sales, it ensures accurate planning with reliable data that’s measured and reported in consistent and easy-to-use formats – and it integrates with your other systems, fostering communication. f
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