The reason for demand for certain products differs from industry to industry. So many factors can play a part in demand with some being more predictable than others. One of the most common influences are seasons. Some products are better suited for certain times throughout the year. For example, the sales of barbeques are generally higher in the summer whereas the sales for heaters normally peak during the cold winter months. Another prime example of something that can affect demand is marketing. Your company may be about to publish a new advert in the industry’s leading magazine and so the awareness of your product or service will increase.
For companies that manufacture these types of products, having the ability to forecast for these busier times of year is essential. Forecasts are quite often based on analysis from previous years. Below are three of the main benefits gained by using forecasts;
– How will the increased demand affect my manufacturing capacity? An increase in demand is generally a good thing for any company, but making sure you have the capacity to deal with the potential influx of orders is just as important. You may come to realise that you need to increase your labour or machinery capacity. Being able to adjust to this requirement may take a while due to new employee training or new machinery installation, and so having the visibility months in advanced is of paramount importance.
– How much more in terms of raw materials will I have to purchase? Before anything else can take place you need to make sure that you have enough raw materials to cover the potential increase in demand. This should also include the materials required to make subcomponents that are then assembled to make the finished item. Planning months in advanced can be advantageous from a purchasing perspective, especially for companies that have a quick manufacturing turnover. The last thing you want is a sudden increase in raw material demand that is hindered by the unplanned inability to get enough raw materials to your shop floor in time.
– How much will my turnover increase by in the busier months? For some companies the increase in demand throughout certain times of the year is what keeps them afloat. Going back to the example at the beginning, a company that manufacturer’s barbeques are going to be heavily reliant on their sales during the warmer months. Being able to plan in advanced as to how much they expect to make during this period can help make decisions on how they are going to run their company. It may be that due to a fall in demand they may have to increase their prices to maintain profitability.
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