As a business owner, you always want to remain ahead of your opponents. To do so, you use several strategies and plan different things. The most important thing you can do in this regard is demand forecasting. It helps you predict the future sales of certain products. Apart from this, it improves order and warehouse management as well. Based on the results of demand forecasting, you can develop strategies to meet customer demands and improve your sales.
When you have some idea about future events you can stay ahead of your competitors by pre-planning. When trying to forecast the future of your products, pay special attention to external factors. Ignoring them can lead to predictions that are not close to reality. Several external factors can impact the sales of your products. So they will also impact demand forecasting. Today, we will tell you about the major external factors and their impact on demand forecasting.
External Factors Affecting Demand Forecasting
From environmental conditions to political events, several external factors can impact demand forecasting. The following are some major factors that impact your predictions. Let’s delve into the details of these factors.
Economic Conditions
The overall economy of the state or country has a deep impact on sales and demand forecasting. When the economy is facing a downturn, there will be inflation in the region. Customers’ demand for certain products will reduce as they tend to save more so that they can fulfill basic needs.
On the other hand, when the economy is good, demand for some products will increase. Customers don’t have to worry about saving as they are getting everything at affordable prices. To navigate this factor, you need to closely examine the inflation rate, unemployment, and other similar things as well before forecasting the future of any product.
Seasonal Factors
These factors have a major impact on demand forecasting. Let’s say it’s the holiday season. The demand for consumer products, travel accessories, and other similar things will rise. On the other side of the spectrum, when schools reopen after vacations, the demand for educational products such as pencils, books, notebooks, etc., will improve. The same thing can be observed at the time of new admissions in schools.
Apart from that, the weather also impacts demand forecasting. For example, if winters come early due to climate changes or continuous rains, then you will observe a sudden rise in the demand for winter clothes and accessories.
Natural Disasters
You can never predict what natural disaster is waiting for you. Floods, earthquakes, hurricanes, etc. are some common natural disasters that can hit your state. Apart from the loss of lives and property, these disasters impact demand forecasting as well. Based on the nature of the disaster, the demand for certain products will be affected.
All the consumer products related to luxury, travel, tourism, and other similar things will observe a decline in their demand. Meanwhile, the food products’ demand will surge up. The overall impact will depend upon the intensity of the damage by the disasters.
Political Events
Political events have a very deep impact on the demand for your products. After general elections or any other major political changes, new governments were established. New strategies and tax plans are presented and implemented. The overall economy of the state or country is also affected by political events. All these things can impact the demand for certain products.
For instance, if the new government increases tax on imports, the price of imported products will increase. As a result, the demand for these products will automatically reduce. On the other hand, if prices are reduced due to several reasons, the demand will increase.
Technology Advancements
We are living in an era where advanced technology is ruling every field. The introduction of the latest products based on this technology impacts the demand for certain other products. For example, in the case of smartphones, every innovation and advancement reduces the demand for traditional cameras, telephones, GPS trackers, etc. To deal with these demand changes, companies need to adhere to new technologies and target the right audience.
Bottom Line
Demand forecasting plays a major role in fulfilling the customers’ requirements, warehousing management, and efficiently processing orders. The aforementioned factors can impact it. So you must consider them when predicting the future demand for your products.