Keeping up with the day-to-day tasks of inventory management can feel like an endless struggle. For new business owners, it can be difficult to keep track of the levels of your current stock and estimating how much stock to order in the future. Using forecasting techniques and models, you will not be guessing anything. You will be able to know exactly when to order more inventory and how much you will need to order.
There are many methods and models you can follow for great forecasting. Learning about all of them is necessary. Check out these articles on naive forecasting and demand forecasting. This article is all about need-to-know forecasting techniques.
Forecasting Techniques
Being able to know and be familiar with some of the more commonly used forecasting techniques will help you understand which technique is best for you and your business. There are so many different variations available. Do not be afraid to experiment to find which ones are best for you.
The moving average technique is the mathematical formula that takes past sales volume to predict future trends. When using your data over a fixed amount of time, like monthly sales totals form the year-to-date, you are able to draw reliable conclusions about the next month’s sales.
Exponential smoothing takes certain data points from what is known as a smoothing constant and takes the moving average a step further. This is the moving average formula and adding a value between 0 and 1 to indicate how relevant you think the past data is to your forecast.
There are so many other great techniques. Look out for our next article on these techniques coming to our website soon!
Inventory management is a process that is never ending. You have so many factors that affect the overall outcome of this process. Knowing and understanding the multiple techniques for forecasting that is available to you, will help you have the tools you need for effective management of your inventory without any stretches of time with overstock or understocked products.