• Home
• /
• Business

Sale forecasting, demand planning play key role in business success

The report also states that this prosperous economic condition in the UAE provides a cushion for demand planning for businesses in the country as if demand is not estimated accurately, businesses may lose out on the opportunities offered by the current (and forthcoming) economic upswings.

This can be achieved by having a strong distribution network. Demand planning can be successful alongwith accurate sales forecasting as this determines projections of all other variables such as inventory and cash flow projections and financial forecasts.

Market analysts are of the view that there should be long-term planning in businesses due to globalisation, as the production facilities are not located nearby and changes in purchase decisions can be quickly adapted by the factories. This is not possible for business in this region, as many of them have to order usually 3-6 months in advance, they added.

Moreover, inaccurate demand plans can translate into considerable business losses either because of excessive stocks or lost opportunities because of stock-outs.

The long-term planning should include setting goals, objectives, strategies to such an extent that the long-term demand can sustain the concerned business project.

In the UAE, economists believe that short-term planning is also required so that as soon as demand arises, it can be met immediately and this means holding considerable stocks as most of the sources are far away.

The bank report also states that there is a considerable choice in forecasting methods, some of which can be quite expensive, thus the benefits need to be carefully weighed against costs.

Where major investment risks are involved, such as launching new products, new outlets or entirely new businesses, companies are served better by establishing a dedicated forecasting project for the purpose which could mean hiring several experts like statisticians, economists and market researchers, to gather market data as well build sophisticated business models.

However, for ongoing short-term sales forecasts, dedicated forecasting effort is rarely possible because of the large number of products and the frequency of forecasts. Simple, inexpensive forecasting methods are more effective.

Actually, statistics can still play a very important role in evaluation of these subjective forecasts against certain statistical parameters. Such an evaluation to validate forecasts leads to further improvement on sales forecasting, stock optimisation and better purchase ordering which consequently helps in achieving greater profits for the businesses in UAE as stock carrying costs and stock-outs considerably influence profitability in this economy.

At present, the UAE economy, both oil and non-oil, is growing with a predictable strength in face of high oil prices. This trend is likely to continue for at least a couple of years, as there is absolutely no sign of a decline in oil prices.

The non-oil economy has been more stable in its growth growing at an average rate of above 6 per cent in the last two years. With the boost from the oil economy, this growth in the non-oil economy is likely to be sustained in the coming years, which also requires setting out demand and sales predictions.