An overview of demand forecasting in Microsoft Dynamics 365 Business Central

Demand forecasting can be challenging for inventory planners, yet it’s critical to do a good job of ensuring that the right stock items are in the right place at the right time along your supply chain. Over-forecast, and you’ll have too much cash tied up in excess stock and inflated carrying costs. Under-forecast, and you risk stockouts and delays to fulfilment.

It’s, therefore, smart to use automation to make your forecasts as accurate as possible.

In this post, we’ll review the demand forecasting capabilities of Microsoft Dynamics 365 Business Central and NAV and give an overview of how EazyStock can provide additional functionality.

EazyStock is an established inventory optimisation app that can be found in Microsoft’s Appsource. With our ready-made connector, it’s easier than ever to integrate EazyStock with the ERP to provide advanced inventory management capabilities. Here’s an overview of what these are:

Demand forecasting in Microsoft Dynamics 365 Business Central and NAV

Microsoft Dynamics 365 Business Central and NAV offer users simple demand forecasting functionality, very similar to most other ERP systems.

The ERP relies on users manually uploading sales or production forecasts and then combines them with the relevant, pre-programmed reordering policies, e.g., Fixed Reorder Quantity, Maximum Quantity, Lot-For-Lot, and Order, which lay the foundation for stocking rules. Based on these rules, it then suggests a reorder proposal when stock levels aren’t sufficient to cover future demand.

Whilst businesses can choose to invest in Microsoft Cortana’s sales and inventory forecasting extension, for an added level of forecasting sophistication, many rely on the basic forecasting capabilities.

The challenges of manual demand forecasting with Business Central and NAV

Here are four key challenges many businesses experience when having to manually create demand forecasts:

1. Manually creating forecasts in spreadsheets is a time-consuming and resource-intensive task – particularly when you have a large portfolio of products to work through.
2. Manual demand forecasts are quickly out-of-date and need updating regularly to keep them accurate, especially items with volatile demand, seasonal profiles, and growing or shrinking sales.
3. Even the best forecasting spreadsheets can be prone to human error.
4. Manual forecasts are usually based on previous sales history. Whilst this method is suitable for inventory items that have stable demand (where the previous demand data is a good indicator of the future forecast period), in reality, very few items follow such simplistic logic. Instead, they experience a range of demand patterns and are subject to market trends, variances in forecast sensitivity and seasonality.

EazyStock’s additional demand forecasting capabilities

Demand profiling

By connecting EazyStock to Microsoft Business Central or NAV, demand forecasting becomes an automated process.

To produce a base forecast, EazyStock takes a data feed from the ERP and starts by analysing historical demand and classifying items into one of nine different demand types, based on their position in their product life cycle.

For example, a product in its growth phase is likely to follow a positive demand trend as sales increase, until it hits maturity, where demand usually stabilises, before becoming increasingly erratic and lumpy as it faces decline.

Demand types are important as they dictate the statistical algorithm that EazyStock uses to calculate forecasts. As products move along their life cycle, demand types and subsequent algorithms are updated to keep forecasting as accurate as possible.

Other factors affecting demand

With the base demand calculated, EazyStock then considers:

• Seasonality – adding seasonal demand profiles helps prevent shortages during peak seasons and expensive surpluses as demand tails off.
• Trends – trends due to changes in consumer behaviour or tastes can be identified quickly and forecasts adjusted accordingly for optimum reactivity.
• Promotions – special offers, discounts and long-term price drops can easily be manually added to the forecast.
• Forecast sensitivity – EazyStock can be configured to weight forecasts on more recent demand data for fast-moving industries or to consider longer historical demand periods for industries where trends change much slower.

Ensuring demand accuracy

With data flowing daily from Business Central/NAV to EazyStock, items are re-analysed, and forecasts updated to ensure they constantly react to market dynamics and consumer behaviour.

EazyStock also tracks actual demand throughout the forecast period and provides alerts when it deviates significantly from its projection. This allows the user to act on the intel and prevent potential stockouts or excess inventory building-up. At the end of a forecast period, it will also highlight extreme forecasting variances, e.g., demand outliers, so the cause can be investigated and future forecasts adjusted accordingly.

Replacing Business Central and NAV’s forecasting and replenishment functionality

With forecasts created, EazyStock feeds these into dynamic stocking policies and reordering calculations to create a list of recommended orders. These can then be reviewed and pushed back into NAV/Business Central for processing.

It’s time to automate demand forecasting

Put simply, EazyStock removes the need for creating manual forecasts or using Microsoft’s sales and inventory forecasting module. Instead, projections are automatically generated using advanced statistical algorithms, ready to inform replenishment calculations and ensure reordering proposals mirror demand requirements.

However, EazyStock is more than just a demand forecasting tool; it also includes advanced inventory classification functionality and the ability to dynamically calculate reordering policies and planning parameters. Ultimately, the software removes all the manual calculations associated with inventory planning and also replaces the need for resource-intensive spreadsheets. Instead, inventory teams can manage by exception, saving time by allowing the system to automate regular orders and dealing with system alerts and anomalies.

If you’d like to know more about how EazyStock can meet your demand forecasting requirements, please get in touch with our team today.