Inventory forecasting involves using business data to ascertain the inventory necessary to meet future orders. The process is based on your estimated sales over a given period and depends on factors such as historical sales information, past purchases, current demand planning and planned production. Some symptoms of poor prognosis include:
- Inadequate control and visibility on merchandise which can lead to higher parts costs
- Low labor productivity and unnecessary time wasted while searching for lost items
- Inability to track inventory coverage, and thus lost claims
- Less asset usage and downtime when searching for lost items
- Customer satisfaction diminished thanks to late deliveries
If you experience any of these signs, it’s time to upgrade your inventory management approach with accurate forecasting. Fixing vulnerabilities immediately helps you avoid further setbacks that could lead to lost customers, decreased sales, and business failure.
Disadvantages of poor inventory forecasting
If your company continues to use ineffective methods of inventory forecasting, it will face many future problems. You will have a hard time maximizing your ROI and ultimately damaging your brand.
Here are more reasons to up the inventory management game with accurate forecasting:
Inaccurate budgeting processes
There is no way to achieve an accurate budget for all of your operating expenses without adequate anticipation. When a company experiences an unexpected drop in sales volume, it is as a result of insufficient operational facilities needed to meet the demand for your product. But you can increase sales
Ideas help you acquire the right talent, equipment, and inventory to meet the increased demand for your brand as it occurs.
Without an accurate projection of your future inventory needs, you may end up with excess products. Overstocking comes with its own set of drawbacks. For example, you will pay extra for storage and storage, and you will face other losses caused by it
You will have to take advantage of methods such as bundling, sales, and product discounts to move additional products in larger quantities. Fortunately, forecasting offers important insights that can help avoid this trend.
Bad customer experience
Ordering online or at your local store to realize later that a product is no longer available can significantly affect customer relationships. The current omnichannel environment provides consumers with a variety of choices. If you can’t fulfill orders within the agreed timelines, your favorite customers may be disappointed with your service and move on to your competitor the next minute.
With forecasting, you will make accurate predictions and make your customers get the items they need when they need them.
Lost to competitors
Poor forecasting of merchandise leads to poor inventory management that will send even the most loyal customers off. The current business environment is very competitive. If your customers are not satisfied with your brand, they will likely find your more regulated business competitor with just a few clicks. Of course, most shoppers will reach out to a competitor rather than wait for the store to restock.
Inventory and demand forecasting has a crucial role in enhancing customer retention. You will get the necessary items in time, and customers will benefit from the express delivery. This in turn leads to an improved experience.
Inability to track industry trends
Suppose you don’t have a reliable system to help forecast demand. In this case, you will take a shot in the dark, trying to make sure how many units you will give for a particular product. This makes you miss out on profitable seasonal opportunities and can result in significant losses that can be attributed to overstocking.
Accurate forecasts of inventory and demand can help you avoid such scenarios. You can check your past sales and compare your overall sales history to get more accurate insights. Doing so will help you identify products that record consistent sales, and you will understand annual patterns.
Loss of credibility
Poor inventory forecasting and sales planning can weaken the credibility of your business. Failure to meet your product demand, poor customer experiences, and the ongoing loss of your competitors are all factors that harm your company’s integrity and will result in lower sales revenue in the long run.
Achieving better inventory forecast
The current business environment is very competitive. To stand out and maximize profits, retailers must streamline their operations and control expenses. Most importantly, you need accurate real-time insights into business operations if you want to achieve a satisfying customer experience.
Smart entrepreneurs continue to restructure inventory management to adapt to the dynamic landscape. Only by forecasting can you be prepared for changes and protect yourself from the uncertainty of the future.
If you need guidance to mitigate the negative effects of bad inventory on your business, don’t worry. Leverage StockIQ’s planning solution for enhanced supply chain planning to increase visibility and improve merchandise management with accurate inventory forecasting.