Labor Forecasting | 4 mins read

What Is Labor Forecasting? 5 Simple Methods For Management

what is labor forecasting 5 simple methods for management
Hanh Truong

By Hanh Truong

Introduction to Labor Forecasting

Similar to maintaining optimal inventory levels to meet demand, businesses need to have the right amount of employees for each shift. When there are too many staff members on hand with little work to do, labor costs will rise. But if the store is understaffed during peak hours, the company risks losing sales. With a labor forecasting system, businesses can effectively estimate their labor needs and protect their bottom line using data-driven insights.

What is Labor Forecasting?

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Labor forecasting is the process of anticipating how many hours a business will need its employees to work in the future. This helps managers find a balance between overstaffing and understaffing their store or restaurant. Doing so is important because companies can avoid unnecessary extra costs.

The following are reasons why businesses should invest in a labor forecasting solution.

  • Enhanced Customer Shopping Experiences
Having the right number of employees each shift will ensure that everyone is working productively. Staff members can also focus on their responsibilities and provide excellent customer service. For example, if a store has enough workers for the day, floor staff can provide full attention to shoppers, rather than be busy multi-tasking. This will further prevent errors and stress among customers and employees.

  • Improved Employee Retention
If a business is consistently understaffed, existing employees will have to constantly bear extra responsibilities and tasks. This can lead to stress and burnout, which will result in absenteeism and mental health issues. On the other hand, having too many employees working the same roles will cause some staff to feel unmotivated. In both situations, employees will feel more inclined to find employment where they can feel valued.

  • Strategic Decisions
A labor forecasting system will enable managers to make smart staffing decisions. Therefore, they can focus more of their time on long-term business plans, such as product development and financial growth.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

5 Common Methods for Labor Forecasting

There are various techniques that businesses can use to effectively forecast labor demands. The following are 5 proven methods that many workplaces are utilizing.

1. Historical Analysis

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Historical analysis is the process of referring to staffing needs from previous months to create an upcoming schedule. This is considered the best way to prepare for labor requirements because it is based on a business's specific needs. To perform historical analysis, managers should review past data and identify any patterns in employment. When examining these trends, they should consider the following questions.

  • Which days or times does the company experience the most customers?
  • Which days or times is the slowest?
  • Are there specific seasons where the store becomes busier or slower?
  • What holidays or events affect the flow of customers?

Organizations can streamline this process by using software solutions, like Zip Forecasting. This tool can automate historical analysis and will help businesses easily anticipate demand. It also ensures accurate forecasting; therefore, companies can effectively reduce labor costs and properly staff their locations every day.

2. Research the Market

Market research will provide insight into regular customer demands and competitor's schedule forecasting trends. Companies can then use this information and align it to their specific needs. New business owners should consider networking with those in their industry to get advice on seasonal trends and scheduling. When conducting market research, teams should make sure to answer the following questions.

  • Does the industry have slow or busy periods or seasons?
  • Do geographical regions impact customer demands?
  • What is the average staff schedule for businesses of a similar size?

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

3. Delphi Method

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The Delphi model is a forecasting method that is often used by companies that have multiple decision-makers and managers. This method involves having these leaders answer anonymous surveys about labor needs in the future. The final scheduling decision is then made based on the collective responses. The Delphi method is recommended for long-term schedules that are sensitive or political.

4. Advanced Quantitative Techniques

This refers to using statistical analysis to identify trends and patterns in historical data and future scenarios. It can also be used to examine market conditions and economic fluctuations. Organizations can use forecasting software, like Zip Forecasting, to streamline advanced quantitative methods. This workforce management solution automatically tracks historical sales and transactional data and makes it easier for users to find trends.

5. Assessments From Managerial Teams

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Managers will have a clear understanding of what their store needs because they experience the workflow daily. Therefore, they can oftentimes identify anomalies that their forecasting systems may not. Management teams also work directly with customers and staff members. This means they will have a deeper knowledge of their employees' personal needs, as well as regional demands. Therefore, when making staffing decisions, it is important to consider managerial judgments.

Key Takeaways - Labor Forecasting

  • Labor forecasting is the process of anticipating how many hours a company will need its employees to work in the future.
  • This helps companies keep a balance between understaffing and overstaffing employees, which will effectively help reduce labor costs and lost sales.
  • Other benefits of labor forecasting include enhanced customer experiences, customer retention, and strategic decision-making.
  • The 5 key methods used to forecast labor include historical analysis, market research, the Delphi method, quantitative analysis, and managerial assessments.
  • Implementing these techniques will enable companies to accurately predict their labor needs and protect their financial health.

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