Top Challenges for Distributors in demand forecasting

March 30, 2022 by
Top Challenges for Distributors in demand forecasting
Asha Jamwal
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The wholesale distribution industry is a critical component in the global supply chain, transporting the vast majority of items between business partners all over the world. The distribution industry is critical to every economy's success. This industry connects producers to their local or global markets. The distribution business is at the heart of the supply chain, delivering goods and services to the right places at the right time. This is one of the most important sectors in any economy. The distribution sector can range from a small local farmer's market vendor to a global conglomerate that deals with high-value items.

The wholesale distribution industry is mainly categorised into four subparts and these are food and beverage, Healthcare, High-tech and Industrial. Whatever the challenge, effectively managing your distribution business has become more complex than ever before. Such as globalization, outsourced manufacturing, supply chain issues, tighter product margins. Due to the Covid-19 pandemic situation becoming more of a challenge, effectively managing your distribution business has become more complex than ever before. Wholesale distributors are rethinking their procedures and use of business data to stay current and obtain a competitive edge in order to be successful. Leading wholesale distributors are taking advantage of digital technologies to build, deliver, and maintain new and significant client relationships.

SAnticipating is tough, and forecasting the future is even more difficult than forecasting the past. Many merchants, on the other hand, find forecasting difficult, but nevertheless all distributors need to priorities demand forecasting. Because it is widely understood that improved demand forecasting improves supply chain cost effectiveness and availability. But what is it about forecasting that merchants find particularly difficult? Now a days there are so many challenges that are faced by distribution industries and some of the hardest challenges are as follows:

Inaccurate Demand Forecast 

The gap between predicted demand and the order that actually came in is known as forecast error. To determine stocking levels, a good inventory optimisation approach analyses the mismatch between projections and orders. Inaccurate demand forecasts can result in the building of surplus inventory or, conversely, product availability concerns. Both of these issues are unfavourable for inventory planners! Any inventory planning team's main goal should be to improve forecasting accuracy. In a nutshell, effective demand forecasting assists you in improving customer happiness, optimising inventory levels, managing supplier lead times, and avoiding revenue loss.

Excessive Inventory 

Excess inventory is a product that has not yet been sold but has a higher demand than expected from consumers. Excess inventory occurs when a company has more inventory than it needs to meet expected demand. This can result in a slow of operational and financial difficulties. Over-buying, faulty estimates, cancelled orders, a weak economy, unforeseen weather changes, uncertain consumer demand, or late or early delivery of goods are all examples of mismanagement of stock demand. Excess inventory is a problem that all business owners face. One of them is the high inventory holding cost. Excess inventory is often seen as undesirable for a company. It increases inventory turnover and the costs associated with managing it.

Inventory Shortages 

The discrepancy between the actual units of inventory physically available and the units recorded in books is known as inventory shortage. When you have fewer things on hand than your records suggest and/or you have not charged enough to the operating account through cost of goods sold, you have an inventory shortage. To overcome these issues companies must have an inventory management system. Inventory management's major goal is to keep adequate inventory on hand to meet customer expectations while being cost-effective and avoiding out-of-stock situations. It also aids in calculating the cost of goods in stock. Shortage is different from stockout. A stockout occurs when a specific item that a consumer is ready to purchase is unavailable for any reason. A shortage is precisely what it sounds like: the scarcity of a specific product or service. A stockout can be caused by a shortage, but that isn't always the case.

Too Much Manual Work In Excel

For inventory forecasting and management, the majority of online merchants, retailers, and traditional businesses have utilised and continued to use Microsoft Excel. The reason for this is that using Excel's built-in forecasting and regression function makes complex and repeated data analysis easier. Even the most experienced Excel user will find excel-based reports to be lengthy and difficult. It’s impossible to deny that scrolling up and down, left and right, concealing and unhiding columns to identify important cells is more complicated. The problem is that inventory spreadsheet files in excel are made up of many pieces and the data is too much to handle or organise on a single sheet. As a result, it's understandable that sales forecasting methodologies and processes are prone to inaccuracy, and the outcomes are frequently unsatisfying. The most common complaint sellers have expressed about using Excel as a forecasting and inventory management tool is that it wastes time. Locating reports from data sources, exporting them, and organising all of that data in an inventory spreadsheet takes a long time. With all of the noise, it's difficult to deliver accurate computations and analyses without making costly mistakes.