Is freehand forecasting the future for merchants?
It’s no surprise that forecasting is a major concern for merchants at the moment. With supply chain issues throughout Europe and beyond, compounded by unusually high demand for seasonal and domestic materials, merchants may need to tackle forecasting and stock management in different ways going forward.
In a recent series of TTJ webinars, timber merchants cited forecasting as one of the biggest challenges to come from the Covid-19 outbreak. And with more and more merchants taking on eCommerce platforms to meet the evolving needs of customers, how can they simultaneously improve the accuracy of forecasting to maintain an acceptable level of availability?
The rate of change is speeding up
The last few months have shown us that businesses must be able to plan for the unexpected and predict the literally un-predictable. No-one knows how the market will evolve; whether a second wave could trigger another lockdown, what the housing and construction sectors will look like by the end of the year or what impact Brexit (remember that?) will have. Uncertainty is the only certainty, and that kind of environment requires a shift in mindset, and a shift in the technology that fuels commercial decision making.
Until now, merchanting businesses have tended to enjoy a relatively sedate pace of change. Increasing environmental pressures have driven the pace of change in recent years, plus the uncertainty around Brexit – but never has the rate of change been so dramatically impacted as with the coronavirus outbreak. This new context of fast-paced change and widespread uncertainty calls for a new approach to assessing supply and demand: what we’re calling freehand forecasting.
What is freehand forecasting?
Freehand forecasting is basically is a change in approach, using the tools at our disposal for a more responsive process that can absorb and react to change faster. Rather than using historic data and extending a trend out, as is traditional, freehand forecasting is about having a good understanding of what the business is doing day to day and using historic trading results to influence where that might take you tomorrow.
Up-to-the-minute information is absolutely critical and having an industry-specific ERP system is essential to achieve that. Merchants need instant access to fast analysis, providing a real-time view on the moving parts of the business, without needing to wait for a month end, or later, to get critical analytical data. Business critical decisions can be made faster but better-informed, based on the information that falls into your eyeline day-to-day – it essentially means that at any one time you have a better, more detailed understanding of exactly what’s happening across the business.
There is no simple solution to forecasting – but there are tools to help
Depleted stock levels and soaring demand have shown many merchants that a just-in-time style mode of operations doesn’t necessarily work; a certain level of stock can help to alleviate short term supply chain issues. Yet no-one wants to be left with a huge overstock of materials that simply aren't selling.
Having more advanced analytics to strategically plan what those stockholdings should be, to minimise risk and maximise opportunity, can only be a good thing. A more agile, responsive system that can help identify where the more profitable and sustainable opportunities may lie could help with planning ahead strategically, while built-in analytics can show peaks and troughs in demand for particular products to help govern pricing processes.
With analysis and reporting functions made simpler and more accessible in modern ERP systems like UT400, merchants will have much greater control over, and insight into, the day to day workings of the business.
Simple tools with complex performance
Business-wide transparency enables faster decision-making and flexibility. A connected cloud ERP system allows clear visibility across the whole business, so greater efficiencies can be achieved in every area, from customer relationship management to administration, stock management to logistics. All the information is immediately available to inform faster, more strategic decision-making.
With over 110 different KPIs built into the UT400 system, there is an extraordinary capacity for customisation, meaning every user can monitor the metrics that are most relevant to them. That makes for a much more in-tune organisation where everyone has more recent, accurate information at their fingertips.
It seems the world is on a rollercoaster and no-one knows which direction it’s going to pitch in next. But digital solutions offer many of the answers for merchants, and can play a vital role in the challenging road ahead.