Best Practices for Inventory Forecasting and Benefits

Tammy of Tammy’s Incredible Towels was overwhelmed with orders for her huge Black Friday sale. She was ecstatic and booked a vacation as a result. Then Tammy received word that the purchases couldn’t be completed; her towels had gone out-of-stock.

Tammy’s life was turned upside down. She was now dealing with enraged consumers attacking her brand on social media, requesting refunds, devoting a lot of money to make things right, and losing a significant number of potential lifelong customers.

What’s the story? Why didn’t she have enough inventory to fill the orders?

Inventory forecasting is a case in point. There are just two words: inventory planning. This is not always a disaster, as it was for Tammy. Inaccurate inventory planning can have a slow, less visible impact on your business by quietly eroding your margins, reputation, and customer satisfaction levels without you even knowing it.

What is inventory forecasting?

Inventory forecasting is the process of predicting how much inventory you’ll need to fulfill future customer orders over a period of time. These estimations are based on past sales data, planned marketing campaigns, and external influences to the greatest extent feasible in order to be as accurate as possible.

The top 4 benefits of accurate inventory forecasting

Now that you know the disadvantages and potential negative consequences of not having a system in place for accurate inventory forecasting, here is the benefit:

1. Less inventory needed on hand

You can store large volumes of inventory in a warehouse and let it collect dust, but this isn’t usually an efficient approach to run a business. You won’t have to purchase inventory you don’t need for a certain length of time if you make data-driven estimates on how much stock you’ll require. I’ve seen firsthand the great benefits of tracking inventory levels throughout various sales cycles. You can enhance inventory accounting, help your cash flow, and even free up funds for other parts of the organization by using a barcode reader.

2. More sales from fewer out-of-stock items

If you have enough inventory on hand, you won’t run into stock shortages or back orders. You can fulfill each purchase as soon as it’s placed and give consumers with the delivery they contracted for. It’s critical for inventory forecasting to align with marketing on forthcoming campaigns (particularly at the channel level).

Furthermore, when consumers discover what they’re searching for online and don’t encounter an “out-of-stock” message just to go somewhere else, the consumer experience is still excellent. Every customer you lose by not having what they require when they require it may also cost you their future business.

3. Less manual labor

Inventory forecasting is more precise and saves time and money because you are better prepared to handle fluctuations in demand and can cut down on some manual labor. Inventory management software, such as Oracle Warehouse Management, forecasts and automates reordering, predicting labor needs, and takes into account changes in order volume to make it simple to anticipate what’s next. This saves time and manpower for warehouse operators and staff.

4. More efficient production cycle

Inventory planning aids in the management of products throughout the entire retail supply chain. When you know your manufacturer’s lead times, warehouse receiving schedules, and the specific stock levels for each product you’ll need to create a new purchase order, you may work more quickly with your supplier and better understand production cycles.

This way, you’re not playing guessing games or just ordering more goods when it appears that you’re running out. You may make informed judgments and avoid the necessity to speed up manufacturing schedules and shipments.