We are all looking for ways to cut costs, sell more, and simplify operations. Forecasting may not always be the first thing that comes to mind to help you with those three initiatives, but if you aren’t planning ahead, you could be missing out.
Keeping the right amount of product in stock is critical for businesses. You don’t want to miss out on sales opportunities because you can’t keep up with demand. Too little inventory to get products out the door could cause your customer to look elsewhere or try a competitor’s brand and not come back. On the flip side, having too much inventory ties up your cash flow and could result in expensive inventory holding costs.
Focusing on improving your supply forecasting offers multiple benefits. From start to finish, your supply chain offers opportunities to innovate, cut operational costs, boost your company’s profits, and positively impact your customers’ experiences with your brand. Frankly, companies who put some time and effort into forecasting have a strong competitive advantage.
Your supply chain’s primary function is to take your products from creation to delivery. Your primary packaging is a key component of your product. So, not only do you need to forecast for the ingredients or components to produce your product, you need to forecast for the packaging as well. Again, the last thing you want is product ready to go, but not have the packaging to get it out the door.
To find the middle ground between not enough product or supplies and too much, companies turn to forecasting.
What is Forecasting?
There are three types of forecasting: supply, demand, and pricing forecasting.
- Supply forecasting focuses on data from your suppliers for both manufacturing your product, as well as your packaging. By collecting the data regarding typical turnaround times for the supplies you need from creation to shipment, you can project when you need to place an order to have the supplies in your hands when they are needed.
- Demand forecasting analyzes how much product your customers are likely to want during a specific week, month, quarter, or year. This data allows organizations to look at trends and keep a suitable volume in stock – enough to fill customer orders, but not so much volume that time, money, and effort are wasted in having to manage excess or obsolete inventory.
- Price forecasting examines data related to supply and demand to project how each factor will affect prices. Effective price forecasting helps businesses predict if and when they need to raise or lower their prices to cover cost fluctuations or changes in consumer demand.
Next, we are going to focus on the benefits of forecasting in general, but since we are in the packaging business, we’ll concentrate more on supply forecasting.
Benefits of Supply Forecasting
From cutting costs to keeping consumers happy, supply forecasting offers a variety of benefits.
- More effective scheduling – Forecasting gives companies the ability to effectively meet future customer demands by addressing the availability of raw materials and component parts, including packaging. Because forecasting gives manufacturers a leg-up on planning and production cycles, companies can schedule their production and operate with more agility, transparency, and efficiency. This improves operations and streamlines processes and labor costs.
- Better inventory management – If manufacturers can better predict orders for certain products, then they can more effectively work with suppliers to achieve optimal inventory levels to reduce the likelihood of part overages or shortages. Not only does inventory reduction decrease the amount of warehousing space, it also reduces the amount of time unused inventory sits in a warehouse. While having too much inventory may not appear troubling, there are still inventory holding costs associated with it – which cuts into your profit. Also, if there is a short shelf life to the ingredients or components of your products, you want to avoid spoilage and the wasted costs associated with it.If the items you need have to be imported, that adds some volatility and complexity to forecasting because there are so many factors that impact the timing of international shipments. However, doing your best to estimate when a supply order needs to be placed is helpful in keeping your business operating efficiently.
- Cut costs – Forecasting can also help companies secure better pricing on their components or packaging needs. By forecasting, companies can more accurately predict the products they need and take advantage of volume discounts. In some cases, companies can work with their suppliers on special services like just-in-time inventory or vendor managed inventory to eliminate their own need for warehousing and labor fees.In the case where your product or packaging components are sourced overseas, your supplier can potentially secure better pricing for you by aggregating your orders with others to get volume discounts. But only if they know when you might need items throughout the year.
- Avoid lost sales opportunities – A big benefit of supply forecasting is reducing out of stock situations. You don’t want to get caught not being able to ship product because you are waiting for manufacturing components or packaging parts.Not being able to ship product can ruin your customer relationships. When we talk about customers, we mean both the retailers who carry your products and the end user. If you sell through retailers and they can’t count on you having product for their shelves, they will start to look elsewhere for another brand to carry. The end user also suffers because they can’t get their hands on your product. If they switch to a competitive offering, they might not come back.
All of these benefits offer companies the ability to save money by cutting costs, make more money by avoiding lost sales opportunities, and making their operations easier and more efficient.
Critical Forecasting Needs
While we’ve already explained that forecasting is critical for any company, there are two situations where it is even more critical that you forecast your supply needs.
- Unique or custom packaging. If you have a unique product or packaging component that no one else uses, it’s even more important to forecast. If it’s not a common item, then your supplier can’t substitute your order with anything else. And, if it’s not something any other customers need, your supplier won’t even carry a minimal amount that could be grabbed in an emergency.
- Importation Delays. If the product or primary packaging components are sourced overseas, then forecasting can help avoid production shut downs. There are so many factors that can delay an overseas order – weather, minimum container requirements, and as we saw last year, a pandemic. Your supplier will have their pulse on the latest shipping times and can place orders to meet your forecasted needs, but only if you work with them to identify needs ahead of time.
How to Get Started
While predicting the future 100% may not be completely possible, companies do have both simple and powerful tools that can forecast supply chain situations and needs. In fact, working with a trusted supplier to help you more effectively forecast is a strong option.
Effective forecasting is both an art and a science. General knowledge about supply, demand and price factors must be distilled into hard data, which then must be analyzed in conjunction with other information, and used to generate meaningful projections.
While global companies use complex software and systems to forecast demand, even small businesses can forecast supply chain needs using simple techniques.
- Tools. Supply chain management (SCM) software can help facilitate the process of forecasting through the use of real-time information. However, it doesn’t have to be complicated. An excel spreadsheet can work just fine.
- Experience. Experience is an asset when it comes to managing your supply chain. Having years of demand data helps you better predict future demand. Look at the history of your product orders weekly, monthly, and quarterly for the past few years to forecast demand.
- If you are just getting started with a new company or product line and have no idea of the future, you can still take a look at planned orders or planned releases. Look at your sales pipeline to see what inventory might be needed and by when.
- Also, in addition to looking at sales, your production schedule may play a big part in determining your supply needs. If you have a machine or manufacturing line that has to run at 100% capacity to ensure cost efficiencies, make sure you have enough supply for that run volume. It’s important that your sales and your operations people be in sync for effective forecasting.
- Supplier Solutions. Having a strong relationship with your primary packaging supplier can be a great way to get started as well. Communication with your supplier is one of the best forecasting tools around. Talk to them about new product launches, marketing promotions, new market entries, factors that may affect changes in demand, and sales goals. The more they can understand where your business is heading and when, the better they can help you determine inventory amounts to make sure you have the product you need, when it’s needed.
How Carow Packaging Can Help
We try to help our customers in a variety of ways with their forecasting needs. We know how important it is to have the supplies you need when you need them. So, we offer our clients the following:
- Forecasting Services. Our clients appreciate that our Order Facilitator, Thor Ruskoski, is American Production and Inventory Control Society (APICS) certified, and that his expertise is available to customers to help them estimate their inventory needs. APICS certified employees are reported to provide more value to their organization, reduce their organizations costs, and increase customer satisfaction, and Thor has proven that to be true by implementing Collaborative Planning, Forecasting, and Replenishment (CPFR) processes here at Carow. After analyzing historical product usage and market trends, Thor conducts monthly forecast meetings with customers to determine future demand.When we work with our clients to help them with forecasting, we look at their order history (up to 5 years of data if possible), we factor in the current economic environment, we evaluate current shipping times for overseas orders if needed, and we help them forecast for their packaging needs.This value-added service is a win-win. It allows us to adjust production and inventory levels and to ensure that our customers have access to the primary packaging products they need, when they need them. It also allows our customers to control their cash flow better, take advantage of volume discounts, and avoid production bottle necks.
- Blanket Orders. To help our clients cut costs, we also offer 6 or 12-month blanket orders on our packaging products. If you forecast your needs and set-up a blanket order with us to purchase a specific quantity of products over a 6 or 12-month period, we can ensure that we have those products on hand when you need them. We procure the quantities throughout the order term and you “withdraw” or take ownership of the products as you need them. We monitor the inventory levels and release product to you as needed. The benefit of the blanket order is that it takes ongoing inventory management off of your plate.
If you have any questions about forecasting – how to get started or how Carow Packaging can help, please call our Solution Specialists at 815-455-4600.
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