Your manufacturing game is only as strong as your ability to predict what your customer wants next, and thus make informed decisions to strategize, plan and produce as per the target and thereby deliver value to customer and excel in meeting customer demand.

What’s Demand Forecasting All About?

Demand forecasting is an essential tool for the manufactures to anticipate future revenue and thereby, set optimal business targets, plan, optimize and manufacture goods, manage resources, inventory, and supply chain, and maintain a healthy cash flow.  In addition, forecasting also fuels the decisions for financial planning and budgeting, capital investment in plants and machinery and raw material procurement.

Accurate demand forecast harnesses the predictive insight with historical data and pattern analysis and helps manufactures to achieve cost savings, improve operational efficiency, and prosper in the highly fluctuating and fiercely competitive market conditions. Accurate forecast sometime also leads to lean manufacturing practices. 

On the other hand, inaccurate forecasts either lead to overproduction, overstock, obsolete inventory and locked up capital or, under production, understock, missed deliveries and disgruntled customers.  

Demand forecasting assumes greater importance in the present-day context of globalization and hyperconnected supply chains as fluctuations in demand in one part of the globe will trigger a rippling effect that will rumble across the entire global network. 
Manufacturing forecasting demands continuous collaboration between various business functions including sales, production, warehouse, purchasing, marketing to build precise
forecasts. 

A Closer Look at Demand Forecasting in Manufacturing

Despite global supply chain issues, shortage of skilled labor and geopolitical disturbances, manufacturing industry output is expected to grow at a healthy compounded annual growth rate (CAGR) of 14.86% during the period from 2024-2028. (Source: statista) .  However, predicting market fluctuations and customer preferences and arriving at an accurate forecast remains a key challenge for the manufacturers. Traditional demand forecasting tools and techniques are not able to cope up with the multi-dimensional complications of today’s global market.  Industry research data reveal that most sales leaders do not have confidence in their ability to generate accurate forecast and they also lack the right tools, technologies and expertise.

• 67% of organizations lack a formalized approach to forecasting altogether.

• 80% of sales organizations miss the mark on their forecasting by 25% or more.

• The average forecast accuracy is only 50%.

• Only 45% of sales leaders and sellers have high confidence in their organization’s forecasting accuracy. 

• Although most salespeople spend 2.5 hours on sales forecasting each week, their predictions are typically less than 75% accurate.

• More than eight in 10 manufacturers say inaccessible data, legacy tools, and cloistered teams impede their forecasting process.

• 81% of manufacturers say they need both new approaches and new tools for accurate forecasting.

(Source: Gartner’s State of Sales Operations Survey, Miller Heiman Group, Salesforce and CSO insight)

Key Barriers to Accurate Manufacturing Forecasting 

Manufacturing demand forecasting is no simple task. Despite its importance in driving efficiency and meeting customer expectations, the road to accurate forecasting is often riddled with obstacles. The ever-changing market dynamics, unpredictable supply chain disruptions, and fluctuating customer preferences can make precision a challenge.

There are several hurdles in demand forecasting that the manufacturers encounter:

1. Demand Volatility:  Volatility in the market dues to external factors like global economic trends, uncontrolled inflation, geo-political disturbances, technological innovations or new competition / competitor product, introduce sudden and often unpredictable changes in consumption behavior and hence, leads to unforeseen disruptions in customer demand. 

2. Data Quality and Availability:  Data quality refers to the completeness, consistency, reliability, timeliness, and relevance of the data. Demand forecasting relies on the quality and availability of data. Poor data quality can lead to inaccurate or biased forecasts, which can result in overproduction, underproduction, excess inventory, stockouts, or missed opportunities, while data scarcity can hinder the application of certain forecasting techniques.

3. Seasonality: Seasonality in manufacturing forecasting refers to the largely expected peaks and valleys in customer demand during the year due to external factors like weather, holidays or cultural events.

4. Demand Fragmentation: Ever-growing consumer preference towards product variations leads to an increasingly common challenge of demand fragmentation and product proliferation. In such a scenario manufacturers need to account for and forecast accurately for each variation of a product or face either lost opportunity due to unfulfilled demand or inventory obsolescence.

5. Supply Chain Visibility:  Complex manufacturing often depends on an ecosystem of suppliers and partners to build assemblies and sub-assemblies.  Manufactures often suffer from the right collaboration tools and techniques and thus lack visibility into upstream demand and/or downstream production.

Salesforce Solution: Achieving Precision in Demand Forecasting

Manufacturing cloud is Salesforce CRM solution (augments Salesforce Sales and Service Clouds) specially designed for manufacturing industry.
Salesforce addresses the demand forecasting through multiple solution components:

1. One of the key features of manufacturing cloud is “Advance Account Forecasting”, that enables improved, configurable (and customizable) collaborative forecasting capabilities. 

2. Advance Account Forecasting Analytics works in tandem with Advance Account forecasting, Sales Agreement and Opportunities information to provide efficient business insight into forecast data and helps to develop accurate forecasts.

3. Advance Account Forecasting features can be extended to channel partners, dealers and distributors and they can collaboratively provide input and create forecast through experience cloud. 

4. The configurable framework in Advanced Account Forecasting enables manufacturer to configure different forecast sets for business units/divisions, customers, regions, products, product categories, or any other custom business dimensions, all within a single instance of Manufacturing Cloud. 

With this functionality, comprehensive 360-degree rolling (and roll over) forecasts can be generated for multiple horizons, such as weekly or monthly, based on opportunities, orders, sales agreements, historical orders, and other business metrics including custom measures. This holistic view of the business allows manufacturers to gain insights from both Salesforce and beyond, enabling better decision-making and planning in the face of industry challenges.

Advanced Account Forecasting has these Key Features:

• Ability to create separate forecast sets to define forecast configurations for different groups of accounts, rather than a single configuration for the entire org. 

• Ability to forecast on multiple dimensions like regions, locations, business units, or any other logical groupings.

• Ability to configure flexible forecast calculations for each forecast set independently for each other and then run these calculations through scheduled flows or in real time.

• Ability to easily modify template ‘Data Processing Engine’ (DPE)definitions to generate, regenerate, rollover and recalculate forecasts. Multiple definitions can be thus created with different business logic to trigger forecast processes for specific forecast sets or accounts.

• Ability to create custom measures for forecast sets, and then specify calculation methods and aggregation type for each measure. Custom formulas can be created to calculate forecast data.

• Ability to produce forecast utilizing numerous measures and group them under revenue and quantity metrics for opportunities, sales agreements, and orders.

• Ability to define and formalize forecast adjustment time window for specific stakeholder roles like sales executives, their managers, channel partners for streamline collaboration.

Salesforce's Advanced Account Forecasting Analytics introduces a revolutionary approach compared to traditional forecasting methods by providing preconfigured dashboards designed to streamline operations, improve accuracy, and enable strategic decision-making. These dashboards focus on holistic data insights and actionable metrics:

1. Account Health Dashboard

   • Traditional methods provide fragmented and manual insights into account performance.

   • Advanced Account Forecasting offers a centralized view of quantity vs. revenue forecasts, forecast accuracy, and identifies accounts needing attention in real time.

2. Account Insights Dashboard

   • Traditional systems lack the ability to track granular customer performance or analyze forecast accuracy effectively.

   • Salesforce delivers comprehensive insights into forecasted vs. actual revenue, product-specific performance metrics, and identifies top-performing and underperforming accounts with ease.

3. Product Performance Dashboard

   • With traditional tools, monitoring business performance by product category or dimension is often manual and limited.

   • Salesforce automates this with dashboards that detail product-family-wise performance, time period-wise forecast variance, and key revenue metrics.

4. Forecast Analysis Dashboard

   • Traditional methods struggle to monitor the accuracy of adjusted and actual forecasts dynamically.

   • Salesforce provides clear visualizations of forecast accuracy over time, allowing manufacturers to refine their strategies proactively.

Statistical Order Forecast Dashboard

• Traditional tools often fail to answer critical questions related to order trends and forecast accuracy.

• Salesforce answers these with dashboards that detail order quantity and revenue trends, distribution of forecasts, and overall accuracy across specified dimensions.

With these dashboards, manufacturers can transform traditional forecasting limitations into opportunities for collaborative, accurate, and data-driven decision-making, ultimately driving efficiency and profitability.

How Salesforce Solution Addresses Key Forecasting Challenges

To overcome the complexities of demand forecasting, manufacturers need a solution that combines advanced analytics, real-time data, and intelligent automation. Salesforce provides a powerful suite of tools tailored to address these challenges

Here's how Salesforce tackles the key hurdles in demand forecasting:

Demand Volatility:  To address the volatility in demands, manufacturers need to maintain close collaboration with the partner and customer community, instant access to historical data and business agility to adapt to rapid fluctuations in demand.
With all the historical CRM data (Customer, Opportunities, Orders, Sales agreements, Assets, Warranties etc.) residing in one place (and with integration with ERP), Salesforce ensures accurate and adequate historical data. 

Manufacturers need to maintain  open communication with suppliers, distributors and even competitors to get a sense of shifting market trends and potential disruptions, as well as looking for advanced forecasting technology that incorporates external data sources for a broader view of the market.
Users can easily regenerate forecasts collaboratively and quickly with channel partners.

Data Quality and Availability:  Manufacturers should focus on the proper data quality strategy, process, and guard rails. These along with the fact that necessary CRM data resides in one place, there is less likelihood of data quality issues. 

Seasonality: Harness historical data and forecast analytics to identify patterns and trends and continuously collaborate with channel partners/dealers/distributers to accurately forecast for seasonality.

Demand Fragmentation: Manufacturers may gather valuable insight into customer’s changing preferences utilizing frequent Salesforce surveys and adopt agile manufacturing techniques to forecast based on customer feedback, on frequent and shorter forecast horizon and may plan for smaller bath size to adjust production. 

Supply Chain Visibility:  Sales agreement, Order, and Forecast information can be exposed to channel partners/distributors and dealers and involve them in  collaborative forecast creation and adjustment. Streamlined and optimized production planning based on accurate forecasts will lead to improved raw material estimation and collaboration with suppliers with ensure visibility across supply chain. 

Salesforce Approach to Next-Gen Forecasting

Salesforce is the #1 CRM solution powered by AI. Manufactures can achieve the following benefits utilizing the ‘Advance Account Forecasting’ solution:

• Achieve Flexible Production Schedule and Resource Allocation: Align production schedule with forecasted demand, rapidly adjust production and resource (plant, machinery, labor etc.) allocation plans, ensure they meet demand spikes and avoid over or under production. This leads to streamlined production processes, reduced waste, and increased operational efficiency.

• Optimize Inventory: By accurately predicting future demand, manufacturers can strike a delicate balance between supply and demand, manage diverse product portfolio, focus on specific products and customer demand, maintain optimal inventory levels, minimize stockouts and achieve optimal inventory carrying cost.

• Enhance Customer Satisfaction: By tailoring forecast  to meet unique demands of priority /high value customers, production gets aligned with demand leading to on-time high quality deliveries thereby enhancing customer satisfaction and loyalty.

• Improve Supply Chain Efficiency: Demand forecasts allow manufacturers to collaborate closely with suppliers, channel partners, dealers and distributors. Supply partners are able to plan their operations better, reduce overall lead time and enhance supply chain efficiency.

• Improve Strategic Decision Making: Advance Account Forecasting Analytics’ provides insights into customers, their demand preferences and market trends enabling long-term strategic decision business/market expansion, profitability new product introduction, and competitive positioning.

• Mitigate Risk Proactively: Demand forecasting helps manufacturers prepare for uncertain and volatile markets. Through early identification of potential demand fluctuations, manufacturers prepare contingency plans and avoid supply chain disruptions.

• Reduce Operational Cost: Improved forecasts results in overall cost-saving through better supplier negotiation, optimized transportation, reduction in inventory, lead time and waste.

• Improve Financial Performance: Accurate forecasts  aid in better financial planning and budgeting, minimize potential revenue loss, improve fund allocation, cash flow and revenue performance.

Summary

Advanced technologies are crucial for manufacturers to mitigate forecast risks and increase resilience. Manufacturers with higher digital maturity provide greater ability to adapt and adjust their forecast quickly and improve supply chain visibility especially during uncertain times. 

Salesforce Manufacturing Cloud’s ‘Advanced Account Forecasting’ capability coupled with ‘Advanced Account Forecasting Analytics’ and partner collation through experience cloud enables manufacturers to address the challenges faced in demand forecasting. With the help of these configurable forecasting solutions, manufacturers can generate accurate demand forecasts and take informed decisions to plan, streamline and optimize their production, inventory and cash flow thereby gaining market shares and customer loyalty in this competitive manufacturing landscape.