How Retailers Can Forecast Smarter and Faster with Driver-Based Forecasting

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Introduction

Driver-based forecasting models? What’s that?

In retail, volatility is the new trend.

A flick in the market switch changes half of how retailers do things. You name it: global economic uncertainty, inflation rates hovering above historical norms, and ongoing supply chain disruptions. These factors have created a high-stakes environment where stability feels like a luxury.

A McKinsey study found that over 75% of retail leaders now revise their forecasts at least monthly—if not weekly—to keep pace with change.

It’s not just external shocks. The very nature of retail has shifted. Now that we’re entering the modern age, consumers expect immediacy, personalisation, and ethical transparency, often changing brand loyalties with a single click.

Promotions, weather, social sentiment—everything affects demand. Yet, why do many retailers still rely on static, backwards-looking models to plan for what’s next?

Driver-based forecasting was birthed into the finance world for this reason. It’s a modern approach where finance teams can build forecasts around the variables that actually influence performance.

Whether it’s foot traffic, average basket size, or qualitative inputs like regional sentiment or social trends, it moves forecasting from guesswork to grounded strategy.

Guessing makes you anxious—who doesn’t? Enterprises require a solid, grounded strategy that gives the right input to form smarter business decisions.

Driver-based forecasting sounds like a novel concept, but it’s backed by modern planning solutions like Workday Adaptive Planning, which allows retailers to move from reactive to resilient.

Remember the ultimate goal: to plan for the disruption, anticipate it, pivot faster, and protect margins in an unpredictable world.

What is Driver-Based Forecasting?

Driver-based forecasting redefines how planning is done. Rather than projecting future performance solely from historical trends, it anchors forecasts to the operational and financial variables that actively influence results.

You need this magic in retail.

These drivers include both quantitative elements (such as foot traffic, conversion rates, and average transaction value) and qualitative signals, like promotional activity, seasonal events, or consumer sentiment observed on social platforms.

Traditional forecasting isn’t a bad option. Back then, finance teams had things done, thrived, and grew even without advanced tools.

But today is different. Navigating these volatile conditions with said method often leaves finance teams struggling to adapt and catch up.

They depend on static data and rigid models, which can’t adapt fast enough when market conditions shift. This makes them less effective in today’s dynamic retail environment.

Driver-based forecasting is inherently adaptive. It links forecasts to the specific inputs that shape outcomes, enabling continuous updates and real-time responsiveness. A sales forecast becomes more than a number; it reflects actual business momentum.

Everyone moves fast. Every organisation wants to stay 1 step forward.

Hence, by employing driver-based forecasting, retailers can respond faster, allocate resources more precisely, and make better-informed decisions as new information comes in.

Key Use Cases of Driver-Based Forecasting in Retail

Driver-based forecasting empowers retailers to respond dynamically to market shifts, integrating real-time data with operational insights to make informed decisions across key areas of the business.

Is this approach just theoretical?

The answer is no.

So, how does it work? How does driver-based forecasting actively reshape how retailers operate?

Sales and Demand Forecasting

Predicting demand is a tough challenge that every retailer faces, and the outcome isn’t always accurate.

Driver-based forecasting changes the game.

For instance, Workday Adaptive Planning enables retailers to forecast sales with precision by tracking real-time drivers like foot traffic, promotions, and seasonal trends.

A notable example is a global retailer that improved forecast accuracy by 30% after implementing driver-based models, reducing stockouts, and optimising its promotional strategies. The ability to adjust forecasts as new data arrives ensures that businesses can stay ahead of trends rather than react to them.

Inventory Planning

Driver-based forecasting offers a clear edge in inventory management.

One can imagine a house inhabited by multiple retail elements. It houses (integrates) point-of-sale data, weather patterns, and even local events so retailers can fine-tune their inventory levels, optimising stock turnover while avoiding excess inventory and missed sales opportunities.

For example, a leading fashion retailer used driver-based forecasting to align its stock levels with demand drivers like weather forecasts and holiday schedules, reducing overstock by 25% while improving product availability.

Advanced tool’s ability to dynamically link demand drivers with real-time forecasting ensures that retailers can maintain the right inventory at the right time.

Workforce and Store Staff Planning

Workforce optimisation is another critical area where driver-based forecasting proves its value.

By modelling staffing needs against projected sales and foot traffic, retailers can better allocate labour, reducing unnecessary costs while improving customer service.

One Workday customer, a major department store chain, used driver-based workforce planning to optimise staffing during peak shopping periods, reducing labour costs by 15% while ensuring adequate coverage during high-traffic times.

This approach not only enhances operational efficiency but also drives employee satisfaction by ensuring stores are properly staffed without overworking teams.

Scenario Planning

One of the most valuable aspects of driver-based forecasting is its ability to support robust scenario planning. Retailers can test “what-if” scenarios, assessing the potential impact of market disruptions, like supplier delays, pricing changes, or shifts in consumer behaviour.

AI-powered scenario planning tools allow retailers to run multiple simulations, offering insights into the potential financial impact of different strategies.

A retailer in the electronics industry used scenario planning to prepare for potential supply chain disruptions, ensuring they could shift suppliers or adjust prices proactively, which ultimately helped them avoid significant losses during a global shortage.

How Workday Adaptive Planning Enables Driver-Based Forecasting

Workday Adaptive Planning is designed to help retailers shift from traditional, static forecasting methods to agile, driver-based models.

Here’s how:

Multidimensional, Driver-Based Modeling for Both Top-Down and Bottom-Up Planning

Workday Adaptive Planning allows retailers to create forecasts from both a top-down and bottom-up perspective.

Whether forecasting from an executive level or incorporating ground-level insights from store managers, the platform provides a complete, holistic view of operations. Retailers can link sales, labour, and inventory forecasts to key drivers, from macroeconomic trends down to localised events.

This flexibility supports accurate, scalable planning across all levels of the organisation, ensuring alignment and responsiveness in an uncertain environment.

Real-Time Data Integration and Collaborative Planning

Retailers must act quickly, and the platform’s real-time data integration makes it possible to adjust plans as new information becomes available.

For example, when foot traffic dips unexpectedly or consumer behaviour shifts, Workday Adaptive Planning updates forecasts in real-time, allowing teams to adapt their strategy without waiting for manual updates.

Moreover, the platform supports collaboration across departments—finance, operations, and merchandising teams can all access the same data and make adjustments together, improving the accuracy and efficiency of the planning process.

AI-Powered Scenario and “What-If” Analysis for Rapid Response to Market Changes

In an environment marked by volatility, scenario planning is crucial.

Scenario analysis allows retailers to simulate various potential outcomes based on changing market conditions. Retailers can run “what-if” analyses to assess the financial impact of various disruptions, from shifts in consumer demand to supply chain delays.

This capability helps retailers anticipate challenges and take preemptive actions to minimise disruption, ensuring a more agile and resilient operation.

Intuitive Dashboards and Reporting to Keep All Stakeholders Aligned

Workday’s user-friendly dashboards and reporting tools provide real-time visibility into key business metrics, ensuring that all stakeholders—from senior management to store operations—are on the same page. Retailers can track their progress against forecasts, see how changes in drivers are impacting performance, and make adjustments on the fly. This ensures that decision-making is always data-driven and that the entire organisation remains aligned around common goals.

Conclusion

From shifting consumer preferences and unpredictable supply chain disruptions to economic uncertainties, retailers need to adapt faster than ever.

Driver-based forecasting offers a powerful solution, providing the flexibility, accuracy, and agility required to navigate these challenges and stay ahead of the competition.

By moving beyond traditional static forecasting methods, retailers can align their planning with the real-world drivers that shape business outcomes. The ability to adjust forecasts in real-time, model different scenarios, and link financial and operational data empowers retailers to make better decisions and respond with confidence, no matter what the market throws their way.

Modern planning solutions like Workday Adaptive Planning enable retailers to embrace this new approach.

With its robust forecasting capabilities, real-time data integration, and collaborative features, Workday Adaptive Planning supports faster, more informed decision-making, helping businesses improve profitability, manage risk, and enhance operational efficiency.

Retailers who invest in driver-based forecasting today will be better positioned for long-term success.

Explore how solutions like Workday Adaptive Planning can transform your retail planning processes and ensure you’re ready to thrive in an unpredictable future.

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