In this blog, we try to explain what is AI based forecasting, what it is used for in business and its benefits. AI planning and forecasting is a field of AI that deals with making scientific predictions about the future without human input. AI planning tools use time series data to forecast future trends in various industries, including sales, healthcare, financial services, and manufacturing.
What do businesses use AI forecasting for?
Using AI and Machine Learning for forecasting enables organizations to avoid common issues associated with planning, such as long delivery times, expensive transportation costs, excessive inventory, and poor decision-making caused by inaccurate predictions.
Let us explore two common types of data forecasting or predictions used in businesses:
Demand Forecasting
Knowing the demand for resources such as materials, inventory and personnel is a critical part of running a successful business. Making predictions on future demand helps companies plan and prepare in advance to meet customer needs. Appropriate forecasting of resources allows businesses to meet internal and external demand.
Growth Forecasting
Forecasting sales/revenue growth of a business is essential for planning and developing strategy. By leveraging data on potential growth, companies can wisely decide on budgeting, resource distribution, marketing tactics, and operational practices, such as inventory location and customer subscription cancellation.
What are the benefits of AI forecasting compared to traditional methods?
AI brings considerable benefits to forecasting, as it saves time by automatically selecting the appropriate forecasting methods for different product levels and combining them. This creates a unique forecasting model for each product without doing everything manually. The key benefits include:
- Automation: The end-to-end process of forecasting can be fully automated.
- Scaleable: Once you have a fully automated pipeline for forecasting, it can build forecasts for 10 or 10,000 stores.
- Prediction Accuracy: the best AI and Machine Learning forecasts will perform consistently better than manager estimates, spreadsheets or other traditional methods, giving better predictions to base your decisions on.
- Data Accuracy: The automation and lack of manual input will significantly reduce errors in your data.
- Speed: An automated pipeline can produce a forecast in seconds. The use of serverless cloud-based technology also allows many thousands of AIs to run in parallel delivering many forecasts in near real-time.
- Unbiased: An AI doesn’t have inherent biases or opinions like human managers.
- Multivariate: An AI can consider multiple data sets and look for patterns, for example, a weather forecast by postcode for a multi-location retailer.
- Free up staff to add value elsewhere: As well as producing better forecasts than a human manager, it can save them the time required to build the forecast, which they can use elsewhere where the skills of a human are better deployed.
