What is the main purpose of demand forecasting in SCM?

The main purpose of demand forecasting in supply chain management (SCM) is to predict customer demand in order to optimize supply chain operations. Demand forecasting involves analyzing historical data, market trends, and economic indicators to estimate future customer needs for products or services. This information is crucial for effective inventory management, production planning, and resource allocation. By accurately predicting customer demand, organizations can ensure they have the right products available at the right time, which helps minimize stockouts and excess inventory.

When demand is well forecasted, businesses can optimize their procurement processes, maintain efficient production schedules, and better manage logistics, ultimately leading to improved customer satisfaction and reduced operating costs. Accurate demand forecasting aligns supply with demand, enabling a more responsive and agile supply chain that can adapt to changes in customer preferences or market conditions. This strategic foresight is essential for maintaining competitiveness in today’s dynamic business environment.