Anticipating the future and planning accordingly is one of the most important things an organisation should be capable of.
The ability to extrapolate market trends, predict consumer responses to advertising and assess what products they want—in short, the ability to forecast demand—can make or break your business.
Doing so, however, is not a trivial matter, and businesses often struggle with the necessary data analysis. However, recent years have brought new technologies and strategies that make demand forecasts more effective.
The Steps of Demand Forecasting
Conducting demand forecasting requires a systematic approach and a sound plan to act by. Broadly, the process involves these steps:
"Garbage In, Garbage Out"
A familiar saying in computer science, this refers to the concept that flawed or meaningless input can only produce flawed or meaningless output. This observation is widely applicable even outside of computer science, and that includes Big Data and demand forecasting.
Even the most advanced machine learning software can do little to help if the data given is incorrect, incomplete or inapplicable. For this reason, demand forecasting is rarely done entirely by algorithms, as a data analyst must be able to supply the right input and interpret the output. Even selecting the right algorithm is important.
The best things you can do for effective demand forecasting are: be willing to refine your data and models, do your research on what factors are involved and, sometimes, trust your instinct and your experience with running your business.
Done well, though, demand forecasting is a powerful tool for developing or changing business models. Hard data isn't everything, but data plus the right analytical software and the right insight can pave the way to success for your business.
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