How SMBs Can Use ERP Data for More Accurate Forecasting

There’s an old saying in the manufacturing business: “Forecasting is easy; all you have to do is predict the future.”

Obviously, predicting the future isn’t easy. Anticipating an often volatile business climate is especially perilous for SMBs, which aren’t equipped to absorb the merciless blow of inaccurate forecasts as easily as large organizations.

So how can your small manufacturing business predict future demand, supply or financial outcomes—and do it with confidence?

You can’t spell “predict” without “ERP.”

Through customizable dashboards and advanced reporting capabilities, ERP software empowers manufacturers to assess the probability of future outcomes based on concrete data, trends and analytics.

SMBs that integrate ERP data into their forecasting strategy will minimize guesswork with a more accurate and comprehensive picture of current and future business operations.

Below, we’ll take a look at the core forecasting functionalities most beneficial to manufacturers.

Demand Forecasting: The Lifeblood of Your Business

Demand is like sunshine for manufacturers, and they need their vitamin D. Demand for products isn’t always aplenty, however—at times contingent on a variety of factors outside of your control.

But with careful analysis of historical trends and ERP data, you can reliably forecast demand for your products and plan production schedules accordingly.

Here’s what manufacturers need to track:

Geography: Where you ship your products has a significant impact across the entire supply chain, from procurement to assembly to distribution. Forecasting where your demand is highest, lowest, most consistent or most unpredictable is therefore paramount to operating at maximum efficiency.

Does your demand map look like this?

Seasons: Similarly, determining which times of year are busiest and/or slowest gives manufacturers the power to adjust supply levels and manage their workforce ahead of time. Not only will this reduce overhead and wasted resources, it’ll keep your business humming like the well-oiled machine it is.

Customers: With access to historical sales data via built-in CRM modules, manufacturers can anticipate demand down to the individual customer. What products they order, when they order them, how many, how frequently—your ERP is a bottomless database of customer information, and it’d be a shame to waste it.

Products: Demand for products can vary by season, region and client. Incorporate product-focused metrics into your forecasting to make strategic, fact-based decisions about the procurement of materials and any increases or decreases in production.

Supply Forecasting: The Fine Line Between Surplus and Shortage

The yin to demand’s yang, manufacturers depend on steadily optimal supply and methodical inventory management to meet their customers’ ever-fluctuating needs. A surplus of supply can mean wasted resources, whereas a dearth of it can be devastating for customer relations.

To optimize supply levels and procurement processes to maintain the appropriate amount of on-hand materials, incorporate the following into your forecasts:

Materials availability: Depending on the time of year, certain materials can either sell like hotcakes or … not sell at all. Use your ERP’s forecasting mojo to get ahead of any potential shortages from suppliers and keep your production schedule intact.

Lead times: Nothing throws your business off schedule like inconsistent lead times. Add in the unpredictability that comes with ordering from multiple suppliers, and things can get messy in a hurry. But they don’t have to. ERP software can track materials from purchase order to the factory floor, bolstering your reporting and ability to forecast future delays.

Financial Forecasting: The Grandaddy of All Performance Indicators

This is it—the be-all and end-all of the decision-making process. The almighty dollar determines the past, current and future health of your business (emphasis on the last one, for the purposes of this article), so it’s critical that you keep your finger on your business’s financial pulse at all times.

With an ERP’s advanced forecasting capabilities, SMBs gain detailed insight into the following:

Income: Income forecasting isn’t just how much you’re bringing in—it’s where it’s coming from, when it’s coming in and the driving forces behind it. Analyze your income numbers alongside your ERP’s inventory management, CRM and order processing modules for a comprehensive glance into the financial lifeblood of your business.

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Accounting dashboard in Sage Intacct (source)

Spending: Without the massive budgets of large enterprise businesses, small and midsize manufacturers need to be able to account for their spending down to the last nickel and dime. An ERP’s spend forecasting affords businesses the ability to drill down into historical spending habits, analyze how effective they’ve been and identify potential increases or decreases in budget allocation.

Changing costs: Few factors impact profit margins more than changing costs, and it always seems to happen when you least expect it. With deep historical insights into materials pricing data, ERP software gives manufacturers the knowledge they need to anticipate these cost fluctuations and adjust their budgets accordingly. Couple this info with detailed CRM data, and your business can rest assured that any and all foreseeable price changes will be accounted for.

Next Steps

So you know how and what you need to forecast—what now? Here’s what you can do this very second to pave the path to forecasting salvation:

Research, research, research. There is no shortage of resources out there, so it’s high time that you study up. (Our Resources page is a great place to start.) What kind of forecasting functionality does your ERP have built in? If you find it’s lacking the aforementioned features, check out our ERP category page for a comprehensive listing of more than 150 software vendors and find the one that best fits your needs.

Meet with business leaders and devise a forecasting plan. Next, schedule a meeting with CEOs, department heads, IT pros—anyone with a vested interest in your current and future forecasting initiatives. Identify short- and long-term business goals and the metrics most instrumental in these objectives, and devise a strategy for incorporating them into your reporting. Then sit back and reap the benefits.

Give us a ring. If you’re still up in the air with regard to your ERP’s forecasting abilities—or if you’re in the market for one that can forecast with the best of them—give our team of dedicated software advisors a call at 855-998-8505. Our phone consultations are free of charge, and we’re happy to share our deep market knowledge with you and your business.