Long-Term Forecasting Advantages
Almost every aspect of your business can benefit from long-term forecasting by helping you reduce expenses, plan your resources, take advantage of trends and avoid surprises. Using a variety of forecasting tools and techniques, you can analyze where each department of your business should be in the next year or two so you make proactive, rather than reactive, decisions.
It’s imperative that you satisfy the demands of your target customers rather than try to create a need with a gimmick or catchy advertising. Through the years, you will need to modify or change your product or service to keep up with changing customer tastes or needs. This means adding new features, dropping certain products or re-branding. Changing how you make and sell your product or service can take a year more, even if you know exactly what changes you’ll need to make. Long-term forecasting of marketplace needs helps you begin the process of learning what modifications you must make and planning to implement them well in advance to ensure timely delivery.
Long-term demand forecasting helps ensure you can meet customer needs to avoid missing sales opportunities. Even a short-term lapse in product availability can have long-term consequences if customers go to a competitor when they can’t find your product and then stay with that competitor. Long-term demand forecasting not only helps you meet end-user needs, but it also helps you keep product in the supply chain to wholesalers, distributors and retailers. Long-term forecasting lets you spot potential spikes in sales, allowing you to build your inventory during slow periods and schedule additional shipping resources during busy times to keep your product on shelves.
Knowing your cash and credit needs well in advance helps you optimize your cash flow and reduce your debt-service expenses. If you run your business using a credit card, analyzing your credit needs alerts you to when it’s time to apply for another card or pay down balances to clear room for a large purchase you want to put on a card. If you see that a large order will bring in cash but later than your invoices for materials and labor for filling that order are due, you can plan your cash flow needs better. This might include raising your cash reserves during that period or arranging for loans or credits with your bank in advance.
Many new businesses hire employees after they see problems such as orders not being filled, poor customer service or overworked staff making mistakes. Projecting your staffing needs in advance allows you to plan your hiring, ensuring that you get the best people at the right times. Long-term human resources forecasting requires you to create an organization chart that shows what your company might look like in a year or two, helping you create job descriptions and determine when to bring these people on board. Demand forecasting that alerts you to slow and busy production times helps you better schedule workers to avoid having to hire extra workers because you didn’t spread your production out or to slow down production because you couldn’t find and train enough qualified workers in time.