Inventory management is not a simple task! Especially because demand and supply keep fluctuating. However, it becomes more hectic when you do all these activities on a manual basis. To avoid inventory management issues, organizations must invest in inventory management software. It is very helpful in inventory optimization. When inventory is optimized, then inventory expenses automatically decrease. With effective asset management software, your organization can perform inventory forecasting.
There are several inventory forecasting methods that are used in the business, and they can be very helpful in growing a business. What is inventory management & what are the main inventory forecasting benefits & methods that you will discover in this blog now! So, let us begin.
What Is Inventory Management?
Inventory management is a strategic approach that assists organizations in managing inventory in the right way. It means how much stock you will require in a specific period of time so that you can do it successfully with effective inventory management.
Inventory intensive organizations suffer from mismanagement of inventory as they have a lot of inventory, and one cannot do it alone and manually. That is why inventory management software is required to automate the process and keep track of inventory located in single or multiple places from the manufacturer to your warehouse to point of sale.
As per the market insights of Data Bridge Market Research, “The inventory management software market will reach an estimated value of USD 3.82 billion and grow at a CAGR of 6.12% in the forecast period of 2021 to 2028.”
What Are the Main Inventory Forecasting Methods for Optimizing Inventory?
Main inventory forecasting methods for optimizing inventory are discussed below:
1. Identify Trends
Fashion and trends of working or utilization of assets and inventory keep on changing as per the industry basis. It is an important factor in identifying trends and this technique is an important and effective inventory forecasting method in terms of inventory optimization. However, it is significant that you have enough data to reach a decision.
Ensure you pay special attention to such patterns in your interest information and change your stock conjectures according to the industry. If you do not pay enough attention to inventory trends, then you might lose potential business.
2. Analyze Customer Demand
When you have several types of inventories, finding customer patterns, the best product, a product that is not doing good can be difficult. But with historical data, you can improve your business efficiency.
Assuming you examined the sales data & information of each item in your stockroom, you'd observe that the demand for various inventory fluctuates impressively. You will find that your customers have developed your popular products and for some customers for other people, there could be inconsistent or low interest.
3. Utilize inventory management software
Another important technique or method for inventory forecasting is utilizing inventory management software. It can be very beneficial for business as it can be helpful not only in inventory forecasting but it will also help in several other ways.
It will show you a complete picture of your inventory in real-time.
This software provides accurate data which is also essential for inventory forecasting. It is also helpful in inventory tracking and you can easily manage inventory levels of all locations.
With accurate data and proper analysis, one can analyze trends that will help business growth and avoid inventory issues.
Inventory optimization is essential for business. It can save organizations from unnecessary inventory purchasing, and it also helps avoid the wastage of resources. For inventory optimization, inventory forecasting methods can be very useful.
Inventory forecasting can give you a business and an extra edge that will take your business to another level. It can save your organization from investing in unnecessary resources. It will provide more control over inventory, which is essential in business, specifically when it is inventory intensive.
Frequently Asked Questions (FAQs)
Q. 1 - What Is Inventory Forecasting?
Inventory forecasting is helpful to the organization in avoiding serious inventory issues such as overstocking and stock-out. Both scenarios are a danger for businesses as they can suffer from huge losses.
However, with inventory forecasting you can discover how much inventory you can sell or use in a specific period accordingly, you can plan how much inventory to produce or purchase. For avoiding stock-out you can know how much inventory you are selling on an average and set re-order level whenever inventory is about to finish you can re-order inventory.
Q.2 - Why Is Inventory Management Important?
Inventory management is important for all organizations because it avoids inventory issues and maintains a balance in inventory. It means that stock is neither too much nor too little because if an organization has inventory issues, then it will lead to business loss. Poor inventory management can lead to deadstock issues. But with proper inventory management, you can easily avoid these issues & inventory management also assist in maintaining compliance. It will provide enhanced inventory visibility that will help you in making informative decisions.
Q.3 - What Are the Factors Important in Inventory Forecasting?
Inventory forecasting is helpful for organizations in predicting the inventory they will require in a specific period of time and according to that, they can calculate cash they will require for the same. Time is an important factor in inventory forecasting, for example when you are beginning inventory forecasting start for a period of one month or two months then match it to how inventory forecasts for this specific period.
The second factor is demand for the product and you can only know it when you know your customer and market. Last taking note of trends and variables, data analysts consider several factors such as supply chain, season, marketing influencers, and so on.