Top Ten Problems Solved by SAP Business One in Wholesale
Problem #4: Inaccurate Demand Forecasting in Wholesale Distribution. How SAP Business One Helps SMEs
This is the fourth in our series of blogs highlighting ten common problems addressed by SAP Business One. In our last blog, we examined problems resulting from slow picking, packing and shipping. In this blog, we highlight problems caused by inaccurate demand forecasting.
The forecasting problem
Forecasting is a necessary part of managing a wholesale business. We do it to manage operations, we do it to manage finances, we do it to build trust. Forecasting is important. When forecasts are accurate, businesses can plan ahead with greater confidence. When they are not, the impact is costly.
Inaccurate demand forecasts are bad for business. When customers are presented with a message saying the item they want is out of stock, they may leave you, buy from somebody else, and never return.
Poor demand forecasting increases costs and reduces profit:
- Emergency stock replenishment may result in you paying higher prices to suppliers.
- Slow moving items tie up cash reserves which could be invested more profitably elsewhere.
- Firefighting is inefficient. Planning ahead lowers labour and material costs.
In many small businesses, demand forecasting is an art form – a bit of Excel, a bit of gut feel, a lot of reacting when things go wrong. This approach may have worked when the company was small enough to be managed by one person, but it is not scalable or efficient. As your business grows it becomes more complex. There may be more staff, more products, more customers, and so on. In situations such as these, you really need built-for-purpose tools to help you manage your business more effectively.
How SAP Business One helps wholesale operations
Intelligent Forecasting in SAP Business One helps you predict future sales and inventory needs using tried and tested statistical methods. It automates the process of generating forecasts and improves accuracy by basing them on actual past performance. It detects patterns such as trends, seasonality, and business cycles – a difficult task when you may have many product lines. And as new data becomes available, it is incorporated automatically.
Intelligent Forecasting is not a rigid system, however. It doesn’t force a method on you, rather it is a tool to help guide decision-making. Business managers can adjust the forecasts or apply uplifts where appropriate.
Let’s say, for example, that SAP Business One has highlighted several slow-moving product lines that would benefit from a promotion. Drawing on previous experience, you may decide to apply an uplift to the sales forecast for the items included in that promotion.
Another important way SAP Business One supports wholesale businesses is by integrating sales forecasts into MRP. The combination of MRP and more accurate sales forecasts ensures you always have the right stock level to meet customer demand.
Learn more
Take a look at the MRP page of this website to learn how MRP in SAP Business One can help your business. Alternatively, download a copy of our SAP Business One Beginners Guide – Wholesale.
In the next blog in this series, we highlight problems caused by disconnected systems.
By Edward Bentley