How the accuracy of forecasts flows into the efficiency of warehouse operations

Today’s supply chain is a complex structure in which process efficiency depends on accurate demand forecasting. Over coffee today, we’ll look at how forecasting accuracy affects order fulfillment and operational efficiency inside warehouses.

Demand forecasting – the foundation of effective supply chain management

Demand forecasting is the process of analyzing historical data, market trends, seasonality and other factors to predict future product demand. The accuracy of these forecasts has a huge impact on a company’s overall operations. Accurate forecasts make it possible to optimize inventory, which in turn reduces the risk of excess inventory or shortages that could lead to delays in order fulfillment and lower customer satisfaction.

Impact of forecast accuracy on warehouse operations

The warehouse is one of the key links in the supply chain. Its effective functioning has a direct impact on the speed and quality of order fulfillment. A warehouse management system (WMS) is a tool that supports the management of warehouse operations, automating and optimizing processes such as goods receipt, storage, picking, packing and shipping. The increased accuracy of demand forecasting can bring significant operational benefits, which are reflected in the efficiency of the WMS.

1. Optimization of storage space

Accurate demand forecasts help to better manage warehouse space. When a company is able to predict which products will be in higher demand, it can optimize the allocation of products in the warehouse. High-demand products can be placed in easily accessible locations, reducing order picking time and minimizing unnecessary warehouse movements.

2. Reduce costs associated with excess inventory

Excessive inventories generate additional storage costs, as well as increase the risk of product obsolescence (e.g., due to expiration in the case of food products). Accurate demand forecasting makes it possible to reduce excess inventory, which reduces the space needed to store products, lowers operating costs and minimizes the risk associated with backlogged goods.

3. Increase accuracy and speed of order processing

The accuracy of demand forecasting allows better adjustment of warehouse operations planning, including work schedules and allocation of human and technological resources. As a result, the warehouse can better prepare for an increase in demand for a given product at a certain time. Better organization of warehouse operations translates into increased speed of order fulfillment and reduced picking errors, which ultimately leads to a higher level of customer service.

4. Effective planning of orders from suppliers

Accurate forecasts also enable better order planning with suppliers, which has a direct impact on the availability of goods in the warehouse. When the warehouse knows what products will be needed in larger quantities in the near future, it can better organize deliveries and minimize waiting times for products. This, in turn, improves the flow of customer orders.

Automate warehouse processes with better forecasting

Advanced WMS systems integrated with demand forecasting tools enable automation of many key operations. Here’s how accurate forecasts can support automation, for example, warehouse scheduling – accurate demand forecasts enable better management of human resources, including planning the number of employees needed in the warehouse at specific times (e.g., during sales peaks).

Higher forecast accuracy = lower risk

Inadequate demand forecasts can lead to numerous problems in the warehouse, such as product shortages, excess inventory and delays in order fulfillment. All these problems generate additional costs, affect operational efficiency and reduce customer satisfaction. Improving the accuracy of forecasts allows better planning of operations, minimizing the risk of such disruptions.

Applications

The accuracy of demand forecasting plays a key role in supply chain order fulfillment, especially in the context of managing warehouse operations. Accurate forecasts allow optimization of warehouse space, reduction of costs associated with excess inventory, and efficient planning of internal operations. The introduction of advanced WMS systems integrated with demand forecasting tools makes it possible to automate many processes, further increasing the efficiency and accuracy of order fulfillment. As a result, accurate demand forecasting is becoming a key factor in a company’s success in supply chain management.

DATURE ENTERPRISE software uses artificial intelligence and machine learning in the process of demand forecasting and inventory optimization. The Dature system allows the collection of cost information in the supply chain and its application to calculate optimal inventory control parameters using a mathematical objective function with constraints. This makes it possible to ensure the required availability of goods at the lowest possible total supply chain cost.

The system provides methods for forecasting seasonal demand and demand influenced by calendar days. Inventory management methods allow for both pre-season inventory building approaches, dynamic safety stock control and JIT.

TheDATURE application ENTERPRISE can also use expertise in the demand forecasting process. Authorized users can enter expert forecasts and adjust statistical forecasts with them. The process is fully auditable in terms of who changed the forecast when and how. This makes it possible to track the accuracy of both statistical and expert forecasts. As a result, the organization learns how to forecast more accurately and improve process efficiency.