Techniques for Businesses to Estimate Demand in Supply Chain Management



The strategies for demand forecasting and planning in supply chain management differ according to each business’s needs. It is not possible to find that one tool that does everything you need, but it is essential to use several of them in your strategy to enhancing the supply chain processes. However, the demand planning software can improve inventory management, financial planning, production processes, distribution, and sales. Since technology requires the human brain to achieve its desired outcome, it is vital to understand some of the most common demand estimation techniques.

Demand Forecasting and Planning

New and established businesses need to estimate the future demand for their products. There are numerous benefits to using demand forecasting software; it includes projecting the cash flows, managing inventory, and risk assessment, among other benefits.  Here are some techniques to demand planning;

Quantitative Techniques

It is a mathematical approach to estimating future demand for products. The technique measures the quantity and recurrence of activity. Businesses can now quickly get their operational statistics and make informed decisions for their supply chain processes. Quantitative techniques use data from the past and present to determine what is likely to happen in the future. Below are popular methods to use;

  • Trend projection; technology helps in recording data over a prolonged time. It makes it less clumsy and bulky to retrieve sales records from five years ago. The data can help determine the prevailing trends that happened over time to predict what is likely to repeat itself in the future. However, this method does not focus on the reasons why the activities happen.
  • Econometric forecasting; the method looks more in-depth at the factors influencing demand in customers. It takes into account the facts to give a representation of the past. Management can use the insights for strategic planning.
  • Barometric forecasting; focuses on what is happening at present to predict the future. The approach looks at what is influencing demand in the current market. However, the factors can change drastically, thus making the method less effective.

Qualitative Techniques

These techniques are more descriptive than the mathematical approach. The prediction does not purely depend on numbers but on the understanding and reasoning of specialists. Standard methods of qualitative forecasting are;

  • Market research; the approach utilizes questionnaires and surveys to get information from consumers. There are vast arrays of data that businesses can get from engaging in market research. New companies can take advantage of the approach to gain valuable information about the market since they have little or no historical data to use. It also helps established businesses gauge the reception of customers to new products they introduce into the market. They can use the information to know ways of improving their brand.
  • The Delphi method; is similar to conducting market research, but it involves a couple of rounds for data collection. The approach can focus on individuals or target a group in their quest for information. Businesses can create a subject matter and have the public air their opinions. The resolution in this method is by analyzing the data, and the experts can come to a consensus.

Angela is a senior editor at Dreniq News. She has written for many famous news agencies.