Improving forecasts for your supply chain to eliminate over- or under-stocked food

Published on December 14, 2021
Myles Parker
Demand Intelligence Specialist

If you’re learning there are more innovative ways to improve future sales forecasting, but you’re not sure where to start - this is for you! In this article, we’ll go through how costly poor forecasting is and what types of insights QSR companies are starting to use to arrive at more accurate forecasts to minimize surplus inventory, wastage disposal fees as well as out-of-stocks leading to unhappy customers.

On average, according to Restaurant Hospitality, the restaurant industry spends around $25 billion every year on wasted food and over-stocks every year due to inaccurate forecasts and poor foot-traffic predictions. Working to prevent food waste can cut an individual restaurant’s costs by up to 6 percent - which is millions saved for a QSR 

Key to this is the ability to understand each location’s environment and how it can impact demand each day. For example, locations near sporting and concert venues need to not only know that a game is happening, but understand the difference between how a game day and a non-game day will affect your sales. In a recent QSR post, we found sports games driving a 25% increase in burger orders, where aligning inventory and staffing ahead of time can help you save big. And sports games are only one kind of event, for accurate forecasts you need to know about other nearby events that will compound or mitigate a game day’s impact

The pandemic years of 2020 and 2021 were particularly volatile, but they revealed a trend many leading QSR companies already were investing towards solving: relying on historical data alone forces restaurants to guess or spend lots of manual time attempting to fix their forecasts. And while managers can always call around to get more staff in on a surprisingly busy day, having the right inventory for a demand surge is far more complex. There’s no quick fix, it takes accurate supply forecasting. 

Forecasting to prepare for the future is the foundation of all operational decisions in most successful restaurants, especially as many shift to constant, dynamic forecasting fueled by external intelligence that enables them to understand each restaurant’s context at scale.

What are you missing when you under or over forecast?

Relying on historical data alone is an issue for supply forecasting, especially given two full years of abnormal dining conditions. With hundreds of thousands of fresh food items at the mercy every day of how accurate your forecasts are, guessing won’t cut it anymore. 

Separately, under forecasting can lead to lost sales when you run out of an item and can impact your brand image. Reliability is a point of pride for many QSRs - when a customer turns up they should always be able to get their favorite menu item. Retail data experts, Repsly shows that 30% of customers who experience stock-outs either buy nothing or go buy a similar menu item elsewhere. Avoid losing customers entirely by allowing better forecasts to help you find the line between minimal stock-outs and minimal food waste. Knowing what will drive demand enables you to align your forecasts to minimize overstocking stores, extra shipping fees to manage overstocks or under-stocks and expensive wastage disposal costs.

What are important inputs for improving forecast accuracy for supply chains?

For any existing supply chain forecast or model, the right external intelligence enables you to improve your forecast through either manual adjustments or by training your forecasts. 

Some of those factors that influence demand, such as the weather, time of year, and events, can be factored in to better match supply to demand. The question then becomes what data or intelligence inputs are most important for understanding demand?

To answer this, you don’t need to be a Data Scientist, you just need to have a pulse on what’s happening around your stores. Incorporating factors that are driving demand is key and often overlooked - factors such as school holidays, severe weather or festivals and concerts happening near or around your stores. For example:

  • There are 13,000 school districts in the U.S., each with potentially different Spring and Summer Breaks. Understanding how different school calendars affect demand as families go on vacation is crucial for your restaurant locations that are near schools. 

  • Hurricanes and tornadoes can cause serious damage across multiple states. Understanding the exact area affected is important for understanding how your labor needs may shift & what locations will experience lessened demand.

  • Festivals and concerts drive hungry attendees through your doors before and after the show. Understanding the start and end time of a nearby Rolling Stones concert in Austin can help you understand which nearby locations will see demand surges before and after the show for better inventory and supply management.

Interested in learning more about insights to improve inventory management?  Visit our info pages to learn about opportunities to stay ahead of fluctuating demand and what’s causing it.

We’ve partnered with some of the top SCM tools to even further improve your accuracy. If you don’t own your own forecasts but leverage forecasting tools like Blue Yonder or Antuit, please reach out.