Inventory issues are a business owner’s worst nightmare.
Especially when you’re in a growth phase, and in the middle of expanding to meet customer demand, it can set back your sales team and impact your bottom line.
Whether you’re an e-commerce or brick-and-mortar store, inventory can get the best of you, and when it comes to inventory forecasting, the majority of retail business owners simply don’t know where to start. Failing to have a sales and inventory sales forecasting plan will usually lead to lost sales, time wasted running around in circles.
What’s the solution? Inventory forecasting.
Inventory forecasting assists businesses in optimizing their inventory purchasing what products to buy, how much to buy, and when to buy. Alternatively, it assists in knowing when it’s time to liquidate unsold inventory.
The key with inventory is understanding past trends to the past to predict the future sales potential. When a business is operating on a “what’s to come” basis rather than just focusing on what’s happening now, operations can run smoothly, especially with inventory.
Here are five reasons why inventory forecasting is essential for the success of your business:
Better cash flow
Let’s face it. We’ve all been there. Cashflow is tight because we just made a huge inventory purchase. Then for the next few months, we begin to get anxious as to why it’s not moving fast enough. When you optimize your business with inventory forecasting, you can accurately predict how much inventory to buy every time so you’re not put in a tight spot with cash flow for your business. And in today’s rapidly changing sales landscape, that makes all the difference.
It is not easy running an entire business. Most days, there are several fires to put out at once, locations to run, customers to keep, suppliers to manage and employees to maintain. You’re busy enough trying to deal with daily operations. Investing time in sales foresight is yet another issue on your mile-long list that is eating away at your time. Forecasting involves various preventative measures so you don’t have to spend hours constantly putting out inventory fires. By making it a part of your business operation, you’re ensuring that you will have enough time to run your business actively, instead of reactively.
With proper forecasting strategies and procedures, you can cut out a lot of complications and processes that are slowing down operations. Inventory forecasting allows simplicity to take over so you can operate on a step-by-step plan instead of jumping all over the place in your inventory tracking.
Save on labor with software
With the ever-increasing technology, businesses are able to cut back on unnecessary labor costs. If an algorithm can do it in way that’s quicker and unbiased, then why hire an employee? Inventory forecasting software is able to complete the simplest tasks to even the extremely sophisticated. One of the more sophisticated tasks, for instance, is predicting what products a customer is likely to buy if they buy a specific one. (eg. if a customer buys product A there is a 93% chance they will also buy product B).
If you’re wanting to ramp up your business to the next level, then it’s time to pick up that money left on the table. Without proper inventory forecasting, your business is losing money. According to a study done by IHL group, retailers lost $1.71 trillion due to out-of-stocks in just one year. This is easy money lost due to lack of forecasting. By preventing out-of-stocks you can prevent a big chunk of lost revenue, and cushion your annual revenue.
As you can see, implementing an inventory forecasting strategy is crucial in ensuring the success and future growth of your business.. Especially when you are in a transition and need to consider whether to hire more people or make that big inventory purchase, inventory forecasting is an essential tactic to lower risk and increase performance in your decision making. 2019 could be the year you save you hundreds of hours of mindless number crunching and even thousands in profit by simply implementing an inventory-forecasting plan.