Many companies today are trying to improve the profitability of their business. If a business sells a product, inventory management is a vital part of this process. Too much inventory causes a lot of issues down the road in a company.
When a business is carrying too much inventory, they have to discount that merchandise in order to move through it. This additional inventory erodes the profitability of the company. Forecasting and demand management strategies are essential to preventing these issues. There is a lot of new technology in the field of forecasting and demand management that you can be use to execute the goals of your business in this area.
What Is Forecasting and Demand Management?
Forecasting refers to the ability to predict customer sales on a product. With more accurate forecasting, companies can predict how much inventory they need to invest in. A lot of companies today have the wrong belief that more inventory is always indicative of more sales. Although there is a correlation there at times, there are also a lot of times when it does not work.
In addition, demand management refers to managing inventory in the right places. The highest volume stores in a company should receive the most inventory. Not only that, but the inventory strategy should consider seasonal sales. One of the hardest things to predict is the sale of seasonal items. There are few companies that have a firm grasp on this process. With all of the changes going on in the market today, forecasting and demand management are more important than ever for the profitability of a business.
Who Uses Forecasting and Demand Management?
Forecasting and demand management usually falls within the supply chain department of large companies. Although small companies deal with these issues as well, few of these small businesses have the capital to invest in this area. Many large companies are making huge investments into this area of business. With all of the changes that are starting to take place, now is the time to drive sales and profits through better inventory management.
There are many companies today that are carrying too much inventory and now have cash flow issues because of it. If a company wants to improve their overall position in the market, this is a great area to concentrate on. Companies that are using forecasting and demand management today need to invest in both technology and additional labor in order to execute their goals in this area. Over a long period of time, this is the best way to take things to a new level in your business. Many companies have been able to drive sales and reduce overall inventory in order to increase the profitability of the business.
4 Tips for Insuring Proper Forecasting and Demand Management
Taking demand management to the next level in a business is not easy. There are a lot of companies today that are trying to use new technology to do this. With all of the great programs out there, it is vital to use one that makes sense for your business. Many people today are excited about all of the different options in this area.
1. Begin with Sales
If you want to improve forecasting and demand management within a business, it starts with forecasting sales at stores. This is something that your supply chain team may have to work with the merchandising team on.
In addition, if you do not have a central data warehouse where you can pull sales by store or by area, it is important to look at getting one. Good data is key to making profitable decisions in a business.
2. Look at How You Allocate
One of the biggest ways to improve demand management is through allocating seasonal inventory at the right time. A lot of companies today wait too long to get their seasonal merchandise out to stores. Instead of waiting until the last minute, ship the product out a month or two early. This is a great way to capture market share and additional sales at the same time.
With that in mind, you should start to look for ways to improve on each seasonal buy that takes place.
3. Look Closer at Your Business
Forecasting really comes down to understanding the business. Looking at the sales last year is the best way to get a baseline of what to do. However, there are a lot of people who struggle in this area because so many factors go into what happened last year.
For example, Easter always changes dates every year. A company does not want to allocate inventory out to stores at the same time they did last year because you would miss those holiday sales.
4. Focus on the Work
Finally, the biggest tip for companies to improve their forecasting and demand management is to simply invest time and resources into the area. Although some larger companies are starting to see the benefits of investing in these areas, there are many small businesses that do not have the ability to do that.
In the coming years, this should be more of a focus than ever before.
To the Sales
Forecasting and demand management is a complicated subject that few people understand. There are a lot of variables involved in the process. Therefore, many businessmen struggle with working on a plan that makes sense for their business. Carrying too much inventory will eventually erode the margins in any business. This is especially true with seasonal merchandise because the value drops so rapidly after the season is over.
Companies should invest more time and money into this area of their business than ever before with the new technology that is coming out in the field. A lot of people are excited about the potential to improve sales and profits in the future.
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