The Dangers of Poor Forecasting and What to Do About It

Towards the end of last year, many believed that 2024 would be a year of oversupply in container space, leading to lower freight rates and plenty of availability. However, the reality of the year so far has been the reverse. Geopolitical disruption has soaked up excess capacity, which has been compounded by a host of blank sailings after Chinese New Year. The result: lack of capacity, longer transit times and a ripple effect which could further constrict equipment availability. This has led to a constrained, but more importantly, less reliable, supply chain and a spike in freight rates.

As a supply chain manager or logistics leader, this can cause severe delays and increased costs, neither of which bode well on a P&L statement or review with executives. In this article, we show how proper planning and forecasting are the key to a reliable supply chain, even in the most tumultuous conditions.

What Could Happen if I Don’t Forecast?

Being logistics service providers, we have the privilege of working with a host of supply chain leaders and are exposed to a wide range of methodologies. We often see supply chain leaders booking at the last minute, only giving a week or less notice for when goods need to sail. If that service is cancelled or there is no availability on that voyage, goods can be delayed in leaving origin and consequently, not arrive in your warehouse on time.

Some of the flow-on effects are:

Higher Costs

There are a number of ways this could play out. If you miss a voyage, you must be re-quoted. Pricing for the next service could be different (potentially more expensive). In addition to this, goods will need to be stored either at your supplier’s facility or at the port, both of which could incur storage fees.

Lost sales opportunities

Of course, you need goods so they can be used to create an end product or be sold as an end product. In either scenario, if you don’t have stock physically available, you may not be able to sell your product, and even if you can, you risk orders going unfulfilled. This can lead to disgruntled customers and spell chaos for your business, especially if this happens regularly. Ultimately this can diminish your brand’s value.

Eroded relationships

There are multiple parties who make up your supply chain and the integrity of the working relationships often underpin your supply chain integrity. If shipments are missed, or planning is inadequate, the trust between you and your stakeholders can become eroded. This could lead to a strained relationship or deterioration of the partnership altogether. Again, causing havoc on your operations.

How to Forecast Effectively to Minimize Disruption

Analyze historical data, but don’t be constrained by it

Be sure to analyze your historical shipping data to see trends and patterns. This will allow you to show fluctuations, approximate volumes and gauge seasonality. However, it’s important to be flexible to adapt to market conditions, changes in sales or upcoming events.

Market Research

Monitoring competitors, macroeconomic conditions, changes in foreign policy as well as cultural trends are all factors to consider which contextualize raw shipment data. Without factoring these in, your numbers are simply just that.

It Takes A Village

Your suppliers, customers, logistics service providers and internal staff will all have their own knowledge and areas of expertise, which will aid your forecasting. It’s important to not neglect this and ensure that you take the time to seek out these valuable insights so that you can use them to your advantage.

At Navia, we take pride in becoming an extension of the supply chain team of our customers, using our expertise to inform decision making and planning. As a result, the customers who work closest to us aren’t left out when capacity is constrained.

Leverage Technology

Of course we’d be ignoring a key point if we did not mention technology. There are a host of softwares focused specifically on planning and forecasting. It’s important to research these and leverage them where necessary.

Our customers can access Critical Chain from within the NaviaHub, which provides you the ability to see orders that are at risk of late booking or not being finished on time by your supplier. In this way, we allow you to manage vendors so that milestones early in the supply chain are being met.

Contingencies from A to Z

Don’t just bank on one forecast, create multiple plans in best-case, worst-case and all scenarios in between. Planning contingencies will mean that if something goes wrong, you are still ready to take action. This is because you had considered your next steps, before disruption occurred.

What This Will Do For You

Of course it is impossible to foresee every pitfall and if it were, supply chain management would not be a profession or expertise at all.

However, by implementing the above, you’ll mitigate supply chain risk and give suppliers and logistics partners a plan of attack. You’ll facilitate suppliers and freight forwarders to collaborate on managing the supply chain, which, in the end, means all parties involved can be agile and aligned in planning for disruptions.

As a consequence, your supply chain becomes more resilient, more predictable, and more cost effective. Ultimately, this provides a better-performing supply chain for your executives and other stakeholders that positively impacts your company’s strategic success.

To talk with us about how to never be caught without a forecasting again, talk to us about our NaviaHub Critical Chain feature by filling in the form below.