When a retailer seeks an assistant with the problem associated with inventory management, they are normally concerned with an increasing stocks level output, that results in customer service and lost sales complaints. They are also concerned about over-stocks that also results to slow inventory turnover and a build-up of dead inventory. Demand planning software is an effective initiative that can solve this problem and address a core structural causes of the inventory management issues.
Superior demand planning starts with accurate, timely, detailed demand forecast. Without a reliable forecast, the retailer will have to attempt to strike the delicate balance between taking too much or little stock. Mostly they feel obligated to protect themselves against backorders and out of stock by stock layers of a reserve additional inventory.
The importance of continuous Forecasts Update
As forecasting and demand planning is entirely considered as the process that happens at the initial stage of every year or the selling season. Superior demand planning request that forecasts should remain dynamic and continually updated so as to reflect the current market condition and sales trend.
It can be much better if a company carefully takes time to forecast demand for a future year or season. It allows open doors to stock over or out of stock by failing to update those forecast on the continual basis. The static forecast that is not yet updated can invariably result in faulty buying decisions.
Forecasts update may be as easy as a carefully monitoring the sales trend and modernizing forward periods thoroughly. In some cases, there can be top indicators that may be used to constantly adjust a forecast. For those categories or items where client’s order are well-booked in advance of the real date of shipping, the advance booking can be used as the top indicator.
The Differences between Actual and Forecast
Immediately the forecasts have been developed, it is crucial to analyze its accuracy. It is important to acknowledge that the forecast is simply like that. Always there can be variances between actual demand and forecast. By analyzing and measuring those differences, factors that cause those changes can be recognized and techniques can be initiated so as to account for them. Therefore, the future forecast will be much more accurate and the differences reduced.
The biggest challenges to achieve superior inventory planning, and to maximize the inventory investment return, depends on developing accurate forecasts. For the past 10 to 15 years a lot of work as to been done so as rationalize the procedures of the supply chain, and remove unnecessary inventory. Hence, it has result to a direct actual astounding productivity gains and a cost saving.