At Retail Acumen we know the importance of your demand forecast on your supply chains, the impact it has on suppliers, warehouses, stores, logistics and transport.

Fundamentally it all boils down to robust maths, where statistical algorithms are used to calculate the most likely future demand at whatever level of aggregation is appropriate - from as low as sku store day through to various aggregations across product location and time hierarchies.

The only certainty in forecasting is that you will never be 100% accurate!
So, why bother with forecasting at all then?
When the Skilled Demand Planner can really add value...
Accurate Sku-Store-Week Demand Forecast - A Panacea or a Possibility?
Don't let demand forecasting be the 'Poisoned Chalice' of your business processes...

So, the basis behind demand forecasting is simple really - it's just a bunch of various statistical models, forecast algorithms and calculations. Massive data volumes being pumped though number-crunching engines. In the end though, no matter how hard you try, you can only be certain of one thing... No matter how good you are, or how fantastic your systems are, the demand forecast is going to be wrong.

It's not the most exciting place to be - to know that the only certainty is to be wrong - so, what's the point of forecasting at all then we hear you ask?!

Retail Acumen have learnt that for most retailers it is understanding the measure of the inaccuracy is actually what really matters.

If you are able to provision for the risk of out of stock or over stock as a result of the inaccuracy, then you have the key to unlocking your supply chain opportunity through a quality demand forecasting process.

Once the products have been signed off as a result of the range and space planning processes your demand planner really comes into their own... When provided with information such as:

• Current market behaviour and range forecasts / range direction
• Past and current range performance / range trends
• Historical analysis of the impact of any demand influencing factors

then a skilled forecaster can estimate, top down, the forecast flow (demand-pull) of a product using additional inputs such as:

• Estimated rate of sale for the range
• Estimated product mix / share of total range sales
• Past performance / demand patterns of similar items
• Seasonality curves

and can achieve a fairly high degree of accuracy - certainly adequate for starting cost price negotiations based on volume commitments for example, not to mention having the necessary supply chain flow data for populating distribution capacity plans and ensuring adequate capacity is secured to cope with key seasonal peaks.

So far it's all been a relatively simple task for your demand forecaster (whatever they'll have you believe!) The real complexity arises as the product is received into your supply chain and requires to be further distribution down to your stores.

Questions around which stores will perform best for which products are asked, and at this level of disaggregation the data tends not to be as statistically valid for most forecast algorithms as it would have been at the higher levels of aggregation.

To achieve an accurate sku store level forecast, then to cut that further down into weekly, even daily, time buckets, would be the panacea for your demand planner. It would enable numerous benefits including:

• The ability to sense check the level of display stock set into the system - enabling debate over assortment planning desicions and highlighting any issues with store assortments, by exception (e.g. where a store's minimum display stock exceed X weeks cover based on the detailed sku-store demand forecast)
• The ability to run a completely bottom up, pull based replenishment plan or to create an 'order up to level' driven supply chain plan.

Retail Acumen recognise that demand forecasting is one of the most data hungry processes in retailing, where data accuracy and data quality have massive repercussions, and where simple errors in processes such as a store physical count or an inaccurate order lead time setting can result in a store residual stock problem which can ultimately erode the net delivered margin of a product significantly in just one inaccurate user's key-stroke!

However, it's not all doom and gloom, demand forecasting need not be the poisoned chalice of your business processes.

Retail Acumen can help you to develop clear processes, to cleanse and improve the quality of your data, to up-skill and educate your teams on the concepts and the importance of demand forecasting to the business; all enabling you to realise significant benefit and increased profitability from your improved forecasting capabilities.

To find out more, please contact us. We forecast it'll be well worth it!