How Accurate Sales Forecasting Helps Improve Your Supply Chain Management Strategy?

Sales Forecasting

Supply chain management is a major concern for growing businesses. If you’ve forged a deep professional relationship with a supplier, you may fail to account for them being unable to accommodate your growing needs.

Your business may be growing too rapidly for the supplier to meet demand, and this can lead to:

  • Lost business
  • Poor customer service
  • Reputation damage

Accurate sales forecasting can help you improve your supply chain. But first, you need to understand consumer demand for products.

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Understanding the Customer Demand for Products

Product demand rises and falls. In some cases, the demand will remain steady for years, but in other cases, demand is short-lived. Hoverboards are a prime example of a product that had a very high demand for a year or so before becoming less popular.

Companies still sell these products but in far less quantity than in the past.

Your business must focus on sales forecasting to:

  • Use historical data to learn seasonality
  • Understand demand growth and recession

If you don’t understand the potential demand for a product or simply don’t know because it’s the first of its kind on the market, you can spend time performing in-depth market research. You’ll find that third-party companies can handle this process for you to better learn:

  • Demand
  • Market penetration
  • Potential

Of course, customer demand is just one part of the process, albeit a very important one. Next, you’ll want to focus on physical product development and advanced inventory management.

Product Development and Inventory Management 

Your product development and inventory management are crucial to your supply chain management, too. For example:

  • Products. Your products must be developed rapidly to meet demand. If you need to add more employees, you’ll need to have the capital to do so. You may have to secure financing or free up capital in other areas to ensure that you can manage product development efficiently.
  • Inventory: You can keep a lot of money tied up in inventory, but you also need to have enough items on hand to fulfill orders. Inventory management will allow you to keep your supply chain moving. Automated systems can be put in place to alert you when inventory reaches a certain threshold. Some systems will even allow you to automate inventory reordering.

If you want to have a streamlined supply chain, you’ll need to focus and invest in product development and inventory management. 


If you run short on inventory, you cannot fulfill orders and will need to wait on a supplier to deliver the items to you. 

The end result?

You may end up with stockouts that cause potential buyers to go to your competitors because you cannot meet their demand.

Effective Sales Forecasting to Minimize Stockouts and Overstocking

Accurate sales forecasting is one of the key ways to minimize both stockouts and overstocking. You can and should spend time forecasting sales to learn when:

  • Potential restocking is necessary
  • You need to accelerate sales to avoid overstocking

There’s a fine line between when you have enough items in stock to meet demand and being overstocked or understocked. You’ll need to forecast sales often to spot upticks and downturns in your sales.

Adjusting to ever-evolving sales growth and contraction is a part of doing business that you’ll need to master to keep your growth continuous. One of the best ways to scale a business is through accurate sales forecasting.

Knowing what your sales future will be is a powerful tool in streamlining your supply chain management.

Streamlining Supply Chain Management Through Accurate Sales Forecasting

Supply chain management can be amplified if you have accurate sales forecasting. The number of sales you make will dictate how many:

  • Suppliers you need
  • Workers that must be hired
  • Financing options you need available

Forecasting can be performed using templates or software that will pull your sales data from multiple sources and generate a forecast.

Accurate forecasting provides insight into the future needs of your business, such as:

  • Will you need to ramp production up or down?
  • Will you need to secure financing to satisfy supplier payment?
  • Will you need to hire new employees to meet the projected demand?

Through accurate forecasting, you can make rapid business decisions that allow for continual growth without concern that your supply chain will cause:

  • Production delays
  • Delivery delays

Customer demand can help you grow a business, but if you’re not prepared to deal with the surge or can’t adapt to it right away, it can be short-lived. Competitors will work to capture the customer orders that you cannot fulfill.

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In Conclusion

Accurate sales forecasting will help you know when it’s time to sit down with your supplier and discuss their ability to meet your growing needs. You may find that the supplier is only capable of fulfilling 65% of orders, so you’ll need to find one or two more suppliers to ensure that your operations can grow uninterrupted.

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