An accurate inventory forecast is invaluable, especially when supply chains and consumer demand are changing rapidly.
Getting forecasts right requires a complex mix of statistical and mathematical data analysis, experience with the business and customer insights.
It also requires people who can make data-informed predictions based on factors that could cause a dip or spike in future demand. Some factors are major, some peripheral. Some could make an entire season, while some have only a mild effect.
Technically speaking, inventory forecasting, also known as demand planning, is the practice of using data on trends and both past and upcoming events to predict the amount of inventory needed to meet future demand.
Accurate forecasting ensures businesses have enough products to fulfill customer orders and that they do not spend too little or too much on inventory.
Managing inventory can be a daunting task. The process and results impact every aspect of your business, so it’s not surprising that a long list of challenges can accompany the effort.
The most obvious place to start is in the warehouse. This is where a lot of inventory lives, and it’s constantly changing and in motion.
Inventory management in the warehouse is a labor-intensive and complex undertaking that involves steps such as receiving, putaway, picking, packing and shipping. The challenge comes from performing each of these tasks as efficiently as possible.
Another issue is obsolete inventory, also known as “excess” or “dead” inventory. Obsolete inventory is stock a business doesn’t believe it can use or sell due to a lack of demand.
Obsolete inventory can negatively affect a company’s overall financial health. As much as 20% to 30% of a business’s inventory is obsolete at any given time, according to Manufacturing.net.
This leads to inventory carrying costs. These costs arise from keeping products shelved at a warehouse, distribution center or store and include storage, labor, transportation, handling, insurance, taxes, item replacement, shrinkage and depreciation.
These costs often represent 20% to 30% of the total inventory value, and that number increases the longer products are held.
An inventory management system like NetSuite helps organisations account for all incoming and outgoing stock to better meet customer demand and avoid the expense of overstock or loss of business with stockouts.
For products-based companies, the system impacts every essential business function, including accounting, purchasing, production, warehouse management, sales and customer service.
At its most basic, an inventory management system provides a way to store, organise, manage and analyse inventory data.
Inventory management software should support real-time updates on product quantities and location, enable fast, actionable inventory monitoring and control and be easy to use.
Underneath those core requirements are critical features that can help manage, control, track and plan inventory.
ERP can ensure accurate inventory forecasting by providing you with the following:
- Inventory Control
- Inventory Management
- Inventory Tracking
- Inventory Barcoding
- Inventory Optimisation
- Inventory Alerts
All of the functionality listed above can give you a better understanding of your inventory position and all the information that will factor into more accurate inventory forecasts.
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