Forecasting the purchases and consumption of goods or raw materials is an important part of the operational manager's duties. Often, the business forecasting is so sophisticated, that activity can take several hours. It may appear that there are so many circumstances that their fluctuations may lead to dramatic changes in corporate results.
Let's look in more detail how companies solve this problems and what toolkit of business software may help to make the life easier. At first, we should mention that the forecasting method can vary. Even more, such differences may appear in the perimeter of one organization. And it arises the necessity of methodology unification though all departments and subsidiaries of a company. After all, the more accurate the forecast of finance and operations is, the lower the risk of loss of revenue for business arises. For example, a large retail chain or a restaurant chain can lose 1-2% of revenue due to the lack of goods or ingredients. The risk of it can only be eliminated by automation that can also bring extra bonuses, such as reducing the allocation of time and resources on this task. There are two types of errors that occur as a result of bad forecasts: surplus of goods or raw materials or the deficit. The surplus leads to the risk of writing off and overstocking the warehouse and, as a result of the latter, the risk of freezing funds in stock assets. The deficit occurs in the case of the absence of any product or goods that may lead to the risk of lost revenue. For example, if a customer comes to a store and doesn’t see a certain item on the shelf, there is a strong possibility that the customer may go to a competitor. This trend is more rigid in catering. If there is not any ingredient, there are not a number of dishes.
How it usually occurs
The most common option for building an operational forecast is sending empty Excel spreadsheets with specified forms with a request to fill in the missing data for a certain period. The departments that participate in the forecasting process can fill in the data in different ways. They may increase the range of products, allocate the same products into different categories, add new reporting periods and so on. A more significant level of unification can include the creation of general directories of product categories. However, we should understand that the range of products in categories may change and may vary between different company's divisions. So that, in this case, it is possible to make a detailed planning forecast divided by products only at the level of a particular store or restaurant, but not for a whole company. At a generalised level, it’s common to use aggregated indicators. Read more about automation in Grocery Retail by Spreadym, inc. here. Such simple forecasting models, that are usually utilized in financial and operational planning of large enterprises, are not sensitive to such important factors as the day of the week, the introduction of a promotion campaign for a particular product, national holidays, seasonal changes and so on. Only advanced analytical business management software can consider such a volume of variables to build an effective forecast. For example, to build a good planning and financial forecast, you will need several features that are included in business performance management software. We can mention scenario planning, centralized metadata management, scalable financial and operational models, high efficiency data handling, range of data directories, BI tools and so on. However, advanced S&OP (strategy and operational planning) or FA&P (financial analysis and planning) software also have significant drawbacks. For example, to construct a forecast, it needs to accumulate statistics in order to form correct indicators. If this is successful in the existing product range, errors may be inevitable with the introduction of a new product. To read more about the lack of transparency and other sophisticated points of complex enterprise performance management software (or also resource planning software and others types), visit this link.
How to solve it
In any case, working with a forecast includes an element of creativity. There is no forecasting software that can solve all of the problems of what to pay attention to and how to link it. But it’s just necessary to choose the tool, that will effectively cope with the tasks. And among the main advantages of the tool you should choose those that meet the following requirements.
Efficient storage of information
Dynamic and centralized management of data and formulas
Secure and reliable
Collaborative work and tracking changes
Smart categorization and free forms for entering data
Integration with third-party systems
And all these features are hopefully integrated in Spreadym.