Demand Forecast for Azerbaijan

Demand Forecast: We prevent both oversupply and shortages, and optimize production and the budget

Product demand forecasting involves analyzing and estimating the expected future demand for a company’s products. The primary goal of such forecasting is to optimize sales planning, manage inventory more effectively, place orders with suppliers, and generally ensure the smooth operation of the supply chain.

Demand forecasting helps prevent shortages or surpluses of products in warehouses and on store shelves, and helps avoid production downtime, disruptions in purchasing and deliveries, and other issues.

RBC Group offers its clients comprehensive solutions for demand analysis and forecasting, with several advantages:

• Reduced effort in the forecasting process and the ability to quickly generate 5–7 forecast scenarios with varying levels of detail.
• Reduction of sales forecast calculation time to a few minutes or, at most, a few hours.
• Improved forecasting accuracy and objective calculations that take into account hundreds of factors affecting the business and sales.

With our solution, you can build forecasting models of varying complexity by product category and brand. In addition, you can identify and account for influencing factors to refine your forecasts, automate and accelerate sales forecasting processes, and work with clear and accessible visualizations, adjusting them on the fly as needed.

Demand Forecasting: Steps

In the classic approach, demand forecasting consists of five main stages:

• Data cleaning

Any data distortions can lead to inaccuracies in forecasting and therefore require so-called “cleaning”—preprocessing to exclude information that could affect the objectivity of the analytical results.

• The Use of Econometric Models

Economic models typically employ calculation formulas and classical forecasting methods, such as moving averages, the Box-Jenkins model, multiplicative models, additive models, and others.

• The Use of Adaptive Models

Adaptive models are a relatively new method for analyzing and forecasting sales. They typically utilize self-learning algorithms and machine learning. Their main advantage is their ability to adapt to changes in the current situation and identify simple linear or complex nonlinear patterns.

• Consideration of external factors

At this stage, we analyze sales records for previous periods and take into account external factors affecting demand, relationships between product categories, product substitutability, and other factors.

• Comparison and review of models

Sales forecasting presents a key challenge: there is no single ideal model or algorithm that can guarantee accuracy in every situation and with any data set. Consequently, it is often necessary to use different models, evaluate them, identify the most suitable ones, and subsequently build model ensembles from them.

When sales forecasting is necessary and when it is not

Demand and sales forecasting is an indispensable tool for virtually any business, even a local one. It helps businesses avoid overspending on production of goods that may not sell, while also preventing shortages and fully meeting the needs of their target audience.

There are only a few situations in which sales forecasts may not be necessary:

• When products are made to order, in this case, the customer is generally willing to wait for the production lead time, and the manufacturer has sufficient time to procure the necessary raw materials and components, manufacture the product, and deliver it to the customer. Consequently, there is no immediate need for procurement and demand planning. However, an indirect need still exists.
• When the capacity required to fulfill and process orders can be adjusted quickly.
• When financial planning and sales forecasting are, in principle, impractical.

In all other cases, demand forecasting is indeed necessary, and the forecasting process itself and the methods used depend largely on the business objectives.

If you are just planning to include a sales forecast in your business plan, we recommend answering a few questions:

1. What is the planning horizon? The forecast must align with the planning horizon. Will it be a month, a year, or a decade? This is a crucial point that must serve as your starting point.
2. What level of detail do you objectively need in the forecast? Will it contain only an aggregate plan by sales region, or do you plan to consider each customer?
3. How often do you plan to review the forecast, and is there a need to revise the forecast after a certain period of time? If so, what is that period—a week, a month, a year, or longer?
4. It what intervals do you plan to make forecasts? For example, if you’re building a sales forecast that accounts for seasonality, a one-year interval may be sufficient. If, however, demand for your products is year-round, it makes sense to shorten the intervals to seasons, months, or even weeks.

   As you can see, it all depends on the specific situation. But the more carefully you approach forecasting before you even begin, the simpler, more cost-effective, and more efficient the process will be. And you can use the data you collect to significantly optimize your business processes.

Comprehensive forecasting tools from RBC Group

RBC Group’s software solutions combine intuitive tools, ease of use, practicality, and clarity when performing sales forecast calculations. They apply to virtually any industry and are currently helping our clients and partners optimize their production and sales processes.

According to RBC Group clients, our forecasting tools help them reach a whole new level:

• They help reduce shortages by an average of 15–18%.
• They reduce inventory (surplus) by 13–16%.
• They improve customer service by 10%.
• They cut forecasting time by 70%.

To generate detailed and accurate forecasts, data on the company’s internal sales and external sales in its target market is sufficient. Of course, you can fine-tune the model at any time to incorporate a broader range of influencing factors and obtain even more objective results.

If you have any further questions or would like to request demo access to the RBC Group service, please submit a request on our website. We will contact you to discuss the details and provide a live demonstration of all the features of our forecasting tools.