Precise Labor Forecasting: How it Creates Retail Success
November 21, 2023
by Malysa O’Connor
A business’s success often hinges on having the right workforce ready. In retail, a well-staffed team drives success and fosters a positive employee environment. This is where labor forecasting comes into play—it’s integral to maintaining efficiency and reducing costs.
Accurate labor predictions lead to happier employees because they’re neither overwhelmed with work nor bored from lack of tasks.
The trick is to balance demand and supply—matching staff schedules with customer demand.
- A well-staffed store is crucial for business success and employee satisfaction.
- Labor forecasting helps businesses avoid staffing shortfalls, overstaffing, or skill gaps and save costs.
- Accurate labor predictions lead to happier employees and improved customer satisfaction.
What Is Labor Forecasting
Labor forecasting helps businesses determine the staff and skills needed by location, channel, and more. It’s all about ensuring you have the right employees in the ideal location at precisely the right moment.
Traditional methods of labor forecasting primarily use historical data and trends to predict future labor demands. Past sales records, seasonal fluctuations, growth rates, and more can all help gauge how many employees will be needed down the line.
More sophisticated AI-driven forecasting tools automatically consider the impact of external events and weather on demand, leading to more precise forecasts. Labor forecasting lets companies easily identify the resources needed to meet customer demand.
Why Does Labor Forecasting Matter?
In retail especially, where margins are tight, and competition fierce, labor management can mean the difference between success and failure.
Mistakes are common without accurate forecasts guiding scheduling decisions: staff might not have enough to do, or they could be frantically rushing around during unexpectedly busy periods—neither is ideal for morale nor productivity.
A well-crafted labor budget and intelligently automated demand forecast enable you to instantly generate more accurate forecasts across channels, locations, or SKUs in 15-minute increments.
Key Components of Labor Forecasting and How It Works
Labor forecasting is a two-part equation: demand forecasting + an optimized labor model = labor forecasting or planning. You’ll need both components to set a strong foundation for optimized schedules.
Demand forecasting, the first part of this equation, involves predicting how much work will be needed in the future. Sales trends, seasonal variations, local events, and even time of day must be considered.
Legion’s AI-powered Demand Forecasting Product uses sophisticated algorithms to give more accurate predictions for demand, helping businesses plan better and avoid costly over- or under-staffing situations. Legion WFM synthesizes historical and current information about how customers buy—understanding and incorporating the impact of demand drivers and future events such as weather or holidays.
With Legion WFM auto-generated, highly accurate demand forecasts, you get optimal labor plans, budgets, and schedules, freeing managers to spend more time with employees and customers—resulting in happier employees and increased labor efficiency.
The second half of our formula is the labor model, which represents your business’ staffing requirements given a particular level of demand. For example, if you run a retail store, you may need one cashier for every 50 customers predicted in your demand forecast.
A good labor model considers variables such as employee skills, availability, compliance rules, and operational constraints like opening hours or specific roles that need filling during certain periods. It also automatically addresses flexible workloads, such as restocking or inventory, without human intervention.
Legion WFM enables intelligent automation to empower managers with staffing guidance and labor insights, instantly predicting the number of employees and skills needed every 15, 30, and 60 minutes daily—resulting in better customer service and reduced labor costs. Legion’s Labor Optimization Product helps businesses build labor models based on their unique workforce—ensuring they have all the employees they need at precisely the correct times.
Pre-loaded, frequently updated compliance templates and business rules help ensure schedules follow labor laws, using optimal labor plans to automatically generate fully compliant schedules that match employee skills and preferences.
Benefits of Accurate Labor Forecasting
- Saves Money: With accurate labor forecasting, you can align your staffing needs with customer demand, avoiding unnecessary expenses from overstaffing. It also lets you make the most out of your budget by planning effectively and efficiently.
- Better Hiring Procedures: Labor forecasting allows you to hire smarter. Knowing when and where there will be higher demand or idle periods in your store or industry will help you spot gaps in your workforce and guide hiring decisions.
- Happier Employees: A happy employee often leads to better productivity and lower turnover rates, so job satisfaction should not be overlooked. When accurate forecasts create more predictable schedules, employees can plan their personal lives around work without fear of last-minute changes.
- Satisfied Customers: Your customers are your endgame. When staffing matches customer flow accurately because of proper labor forecasting, customers receive prompt service, creating a pleasant shopping experience and making it more likely they’ll return.
Effective labor forecast management creates a positive ripple effect throughout the organization—from cost savings to happier employees and satisfied customers.
Methods for Labor Forecasting
You can conduct labor forecasting using different methods depending on your needs. Let’s look at some popular ones.
Historical Analysis Approach
As the name suggests, historical analysis looks at past data to find patterns. But, it only works well when future conditions mirror the past, and it might not be ideal for newer businesses with no historical data.
The research approach digs into industry trends and market dynamics. It goes beyond your company’s historical data and looks at the bigger picture to gather data.
Advanced Quantitative Approach
An advanced quantitative approach uses complex statistical models that factor in more variables than simpler methods can handle—making them more accurate but more challenging to master without proper tools, like Legion Demand Forecasting.
Managerial Assessments Method
The managerial assessment method is where organizational leaders make educated guesses based on their collective experience.
Legion WFM’s Software Makes Labor Forecasting Easier
Labor forecasting can be a challenge without reliable data and analysis tools.
Legion’s Workforce Management Software synthesizes thousands of data points, including historical data, ongoing operations, and future weather and local events, to create the optimal labor plan without human intervention. This gives retailers a clear picture of their staffing needs and helps them make informed decisions.
Legion AI-powered Demand Forecasting is self-learning and automatically analyzes subtle patterns in the data to deliver highly accurate location-specific forecasts even in changing conditions. Legion demand forecasting automatically gets smarter and adapts to your business.
With accurate forecasts, companies avoid overstaffing situations—saving money on unnecessary wages—but also prevent understaffing, where poor service may result in lost sales opportunities.
- You will save valuable time spent poring over spreadsheets or relying on instincts for planning shifts.
- Your teams will appreciate knowing their schedules beforehand, improving morale and lowering turnover rates.
- Customers will enjoy better service due to optimal staff allocation during peak hours.
Labor Forecasting Is A Key Component To A Company’s Success
Legion’s AI-powered Workforce Management Software removes the guesswork from retail labor forecasting. By learning from your historical data and external factors, you can predict staffing needs precisely, avoiding overstaffing costs and understaffing pitfalls.
Remember: effective labor forecasting isn’t just about cost-saving. It boosts staff spirit and customer satisfaction, which will have a very positive effect on your business.
Companies that use intelligent automation and data analytics can ensure they have the right employees in the right place at the right time, totally transforming the efficiency of their workforce.