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Key challenges and benefits of demand forecasting in supply chain

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Key challenges and benefits of demand forecasting in supply chain

Key challenges and benefits of demand forecasting in supply chain

Since there has always been competition in the business ecosystem, it takes both the business sense and good fortune to survive in this fast-moving world of business. As a result, unexpected changes in the business environment have a significant negative impact on the supply chain companies .

The Australian Bureau of Statistics data on retail commerce demonstrates how much more challenging it has become for the retailers after the pandemic. To have a better perspective on these burning issues, let us discusses the challenges and advantages of demand forecasting in supply chain for retailers and supply chain constraints in the retail industry.

Managing volatility in increasing demand

Vital elements controlling rising demand volatility include stock management, customer experience, and distribution channels.

The corporate-level retailers’ issue is achieving customer experience standards while adapting to their beliefs. This can be accomplished in many firms by enhancing ease by optimizing online sales platforms and product lines. Woolworths is achieving this through its recently unveiled new “marketplace,” which will treble its online product selection. Good logistics agreements are also necessary for increased online sales to guarantee prompt consumer deliveries.

Given that virtually every aspect of the supply chain is undergoing disruptions for domestic and international enterprises, such a move to a more robust online retailing presence has been challenging to manage. Retailers are facing delays in product delivery times, skyrocketing freight costs of more than 300%, and limited product availability. These issues range from factory shutdowns caused by expanding energy power shortages in China’s manufacturing regions to diverting ships from standard ports to deliver PPE and vaccines. Domestic and international freight disruptions are anticipated to continue at least through the middle of 2023.

Limitations and considerations in the supply chain

The balance between “just-in-time” deliveries and “buffer stock” should be reassessed in light of the supply chain restrictions. Many shops store much more inventory due to supply chain concerns; some have 20% to 30% more than before COVID-19 levels. This may go beyond only requiring more finished goods from vendors along the supply chain but also more significant inventories. However, compared to employing air freight to avoid international shipping, it is one of the more practical solutions for many merchants. It can have a significant influence on working capital and funding requirements.

Another difficulty is managing more enormous stockpiles while considering minimizing stock damage or loss. To give customers the most recent stock availability information, retailers must maintain inventory visibility across the supply chain

The variety of updated marketing channels and changing consumer tastes, such as a preference for less touch, shape space considerations. Retailers may think about how many and which locations to keep open and how to use the available space, whether for traditional foot traffic, new safe delivery methods, or mini distribution centres (for warehouse and dispatch).

Retailers must also evaluate supply-chain risk, their suppliers’ “reshoring” or “nearshoring” tactics, and the effects on their unit costs. This supply chain review will also consider the increased emphasis on ESG concerns, not the least of which are those related to modern slavery. This illustrates how a retailer’s change in demand affects producers and importers.

Demand volatility will continue

The competitive climate in retailing post-pandemic is expected to continue to be characterized by more demand instability, necessitating a fundamental rethinking of future business models rather than just a strategic change. For merchants, there are four essential factors to consider:

  • Modifying their inventory management and systems to recognize the hazards in their supply chain and to spread these risks by locating alternative suppliers and, if possible, offering various services.
  • Having sufficient working capital and funding, as well as effectively communicating these needs to lenders or other potential capital sources. Effectively share this tale with their clients and other stakeholders to preserve their brand’s reputation
  • Incorporating more ESG standards to reflect operational changes and their effects on ESG factors that are required in response to the current supply chain demands, as well as conveying these features to the customer.
  • While the current attention is on the difficulties that merchants face as we approach the Christmas shopping season, it is evident that the effects of global supply chain bottlenecks will last well until 2022. Retailers will likely see growing pressure from a reputation management perspective as the impact of the supply chain, and stock constraints persist; thus, it will be crucial for them to develop effective plans to interact with clients, investors, and the media. Consumers and the impact of stock and supply concerns on holiday and celebration preparations will initially be the focus, putting shops in the spotlight. However, once this has been established as a media story, it will only become a more significant issue in 2022.

Advantages of contemporary supply chain strategies

Scenario design

Organizations can evaluate the effects of various supply chain modifications through scenario planning without causing any disruptions. Companies can be prepared for unforeseen circumstances using a contemporary, AI-based foundation. Scenarios simulate the effects of adjustments to the inventory level or the production schedule on key performance indicators. With more intelligence at their disposal, firms can then react quickly to changing circumstances.

Reliable prediction

Manufacturers should be able to precisely forecast consumer demand rather than frantically trying to meet it. Even if accurate, deploying a demand forecasting model in volatile and quickly changing markets can be challenging. Utilize cutting-edge approaches like AI and machine learning to recognize patterns and correlations in data sets that planners might overlook.

Planning scale

The ability to grow and alter the planning process is another advantage that aids in managing demand volatility. Companies may make strategic decisions based on new data, publish forecasts promptly, and apply them to every level of product granularity by reducing the time needed to develop and agree on supply chain plans. It is beneficial to decrease the planning process’s duration to update production regularly because disruptions can happen every day.


With demand forecasting encompassing competitive intelligence, assembling supplier data, and exploring patterns to predict the future performance, it is time for the supply chain companies to leverage some effective and well-laid down strategies to provide accurate demand forecasting for accounting for ambiguity while concentrating on the eventual goal of offering service to the customers  

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Anna is a writer at Next gen hero, she was working as a full time journalist before this. She loves her job and believes that the company has a great future ahead of it. She wants to help expand their reach and become a leader in the industry.

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