Forecasting Labor Demand- How to Maximize Employee Productivity

Forecasting Labor Demand July 27, 2020

Jin Hyun

Writer

When it comes to appropriately meeting customer needs and optimizing labor costs, businesses need to determine the optimal staffing levels for their operations.

Under and over-staffing can have significant consequences for a business. While understaffing will result in increased workloads for staff members, risk of high employee turnover rates, and poor customer service, over-staffing will have the opposite effect and create idle employees with not enough tasks to complete, as well as unnecessarily high costs of doing business.

Forecasting for labor demand, therefore, is often the most efficient and effective way to optimize the workforce, maximize productivity, and reduce the cost of doing business, all at once.

What is Labor Demand Forecasting?

In short, labor demand forecasting revolves around predicting how busy your company is likely to become in the future. Most forecasting methods of this nature revolve around estimating future demand based on historical sales data and market conditions.

Ultimately, this type of forecasting could help to-

Make labor cost alignment more efficient and more practical
Prepare for staff unavailability and unpredictable events
Ensure skilled workers attend to specific areas of demand where they are most effective
Cut down on unnecessary workforces and over-staffing

Things to Consider

Successful forecasting will, of course, revolve around several key factors, which may vary from business to business. However, asking the following general questions can provide a starting point for businesses belonging to any industry.

Current plans and targets you have in place for labor organization - Who do you have available in the long-term?
How is your company performing financially? What salaries can you expect to pay workers in the long-term?
Are you able to adapt to new goals and to reconsider your hiring policies?

Keeping an open mind in terms of employee onboarding and economic strategy is crucial. Otherwise, businesses may run the risk of poor customer service by failing to meet consumer demands.

Common Challenges

Forecasting for future staffing may not be a simple process as it requires complex calculations and detailed data analysis.

There are various obstacles and concerns businesses should consider before producing projections to ensure they avoid running into these issues themselves.

Changes in labor laws - Unfortunately, it's difficult to predict how legislation may change in the years to come. For example, several cities and states have begun to implement laws that require employers to produce workforce schedules two weeks in advance to make work hours more predictable for employees.

Failing to consider promotional events - A major oversight in some forecasting plans can include promotional activity. Failure to consider cut rates and seasonal services may affect the accuracy of labor forecasting.

Unprecedented global events - While forecasting is built to handle many unpredictable events, some sudden changes and abrupt market issues such as recessions or global pandemics may be more difficult to foresee during the planning process.

Relying too much on the past - Sales volumes can change quickly, and it may be too easy to rely on historical data. Forecasting must, therefore, remain flexible enough to consider any and all recent external factors such as weather and local events.

Tips For Creating Demand-Based Scheduling

While creating demand forecasting-based employee schedules is far from a one size fits all process, adhering to some key tips can help businesses maximize their workplace productivity.

Consider staff availability - When determining optimal staffing levels, it is crucial to consider existing staff vacation days and plan ahead. Managing these issues with staff members directly and being considerate of their schedules is key to increasing staff retention and satisfaction.

Observe customer trends - Customer behavior is likely to dictate much of seasonal demand. It is important to not only look for trends but also actively research them. These trends will inform businesses of consumer spending habits, which will then determine the optimal staffing levels.

Stay up to date with labor laws - Overworking and overlapping shifts may result in breaching employee rights. Regularly search for workforce management laws both on a local and federal level and make sure all schedules are in compliance with the most up to date regulations.

Determine peak times - By using historical insights and past sales data, discover when peaks occur on an annual basis. Likewise, determine slower sales periods during the year and prepare the workforce accordingly.

Why Automate Labor Forecasting?

Unfortunately, human error is always a potential stumbling block when estimating demand. There are also too many internal and external factors to take into consideration which leaves much room for manual calculation errors.

Accurate forecasts should consider factors such as seasonal changes, recurring trends in demand, and economic shifts as they will impact the success of staffing strategies in the long run. Therefore, for the most reliable reports and strategies, it may be worthwhile considering an automated service.

Forecasting for labor demand through algorithms and software will allow users to look carefully at the raw data. These systems learn from previous sales patterns and can predict future demand based on algorithmic data analysis, rather than on precedents and gut instincts.