5 Reasons Why Demand Forecasting is Important for Small Businesses

Demand forecasting is the act of investigating the current and future demands of a product by analyzing the sales and industry trends to obtain insights about the supply chain management. While it sounds like a process suited for a big organization, it’s just as useful for a small business of any kind.

Demand forecasting allows a company to make informed operational decisions by predicting and analyzing their supply chain. As today’s businesses are bolstered by global customer reach and ease of logistics, small businesses need to divide their resources in the most efficient way possible.

If you’re still not convinced, here are seven reasons why demand forecasting is vital for your small business.

Manage Logistics Better

A common issue in logistics is the lack of human resources. For example, an order is ready to ship out, but due to the lack of immediate manpower, it’s unable to.

With a clear idea of how much orders will be shipped, more accurate levels of manpower can be planned out.

Reduce Latent Inventory

When working with a supplier overseas, orders for raw materials take time, so a common practice is to order a ton of raw materials. On the flip side, you’re wasting money and space storing unused raw materials while waiting for orders to come in. Demand forecasting helps you manage inventory and receive documents from your suppliers when you need them.

Increase Customer Happiness

Customer happiness is highly dependent on what the product is and when they can receive it.

Demand forecasting for a small business allows you to predict product demand, so that customer orders are fulfilled in the most efficient way. This process will enable you to build meaningful long-term customer relationships.

Reduce Cost of Wastage and Product Obsolescence

For all types of businesses, demand forecasting is crucial to ensure that you don’t have too much or too little inventory on hand. Proper demand forecasting ensures that raw ingredients won’t be wasted at the end of the day.

Upgrade Promotion Strategy

It can be overwhelming to plan a price and promotion campaign for multiple products running concurrently. Demand forecasting enables you to properly manage sale campaigns through managing inventory levels, the workforce needed for the increased orders and assign a price and promotion to maximize revenue.

While demand forecasting has a multitude of benefits for your business, it can seem daunting and time-consuming. With a lean team, small businesses can make the process smoother by using demand planning software.

This software makes the process easier and more accurate. Features that are sought after, in this application, are merchandise planning, assortment planning, inventory planner, promotion management, price, and markdown planning, along with replenishment planning.

Tools like Demand planning software allows smooth collaboration among multiple stakeholders who are involved in the operations process. The software also provides analysis like trend and predictive analysis that will take time when done on their own. Because demand planning software aggregates and analyzes massive amounts of data, that provides more reliable forecasts and in turn, fewer stock shortages and wastage.


Demand forecasting is an essential part of running a business. Do your research or utilize available demand planning software because it will make all the difference when running your small business.

About RJ Frometa

Head Honcho, Editor in Chief and writer here on VENTS. I don't like walking on the beach, but I love playing the guitar and geeking out about music. I am also a movie maniac and 6 hours sleeper.

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