Benefits of Using Inventory Forecasting Software for Your Business

Guesswork in business can cause huge losses. You might produce more than what is required for a particular period, or on the other hand, your popular product might run out of stock. Both these situations can affect the revenue. To prevent these situations, the majority of businesses have adapted inventory planning software.

If you don’t know what inventory management software is and its role in supply chain management, check out here.

What is inventory forecasting?

Inventory forecasting is used to determine future inventory levels based on previous sales, trends, and upcoming events. Accurate inventory planning helps businesses to spend the right amount on inventory to fulfill customers’ needs. You can cut down unnecessary costs and increase overall productivity using this tool.

How does inventory forecasting work?

Inventory management maintains a balance between managing the cash flow without spending an extra amount for warehouses by overloading stocks and keeping safety stock in hand to meet consumer demand appropriately. Major factors involved in inventory forecasting include forecast period, customer requirement, and application of upcoming trends.

Deciding the forecast period is essential during the forecasting process. Standard forecasting intervals include one month, three months, and one year. When you are forecasting for one year, it accounts for seasonal fluctuations. A statistician calculates customer demand while generating a forecast which usually involves prior 30 days of sales.

Analyzing upcoming trends is an essential part of forecasting. It includes parameters such as supply chain activities, sales velocity, and seasonality.

Types of inventory forecasting

1. Trend forecasting

Trend forecasting predicts how much a product will sell according to future trends. This method analyses the upcoming trends, excluding seasonal effects using previous sales data. You can use more granular sales data to forecast how specific customers are more likely to buy products in the future. Organizations can design new marketing strategies and offer sales using this valuable data.

2. Graphical forecasting

In trend forecasting, the data is represented in mathematical numbers, whereas in graphical forecasting, the same information is graphed to determine sales peaks and valleys. Graphical forecasting ensures that the critical points aren’t missed while carrying out the forecasting technique. A visual method is easy to understand and can focus on various parameters such as trends and seasonality, so they are not overlooked or missed.

3. Quantitative forecasting

Quantitative forecasting is considered to be more accurate than qualitative forecasting. To obtain accurate results, companies need to gather more past data. The accuracy level depends on the amount of past data used for predictions. An example of quantitative forecasting includes time-series forecasting, used to predict future trends. In this technique, temporary quantitative data is used to make forecasts.

4. Qualitative forecasting

Quantitative forecasting focuses on historical data, but what if the companies lack previous sales? Qualitative forecasting is designed for this purpose. In this case, the companies can build their dataset from their customers. They collect complex data and focus on market research to gain information. Forecasters then design models to obtain accurate predictions.

Benefits of inventory forecasting software

Now that you know why it is necessary to have a forecasting tool to predict future sales, check out how inventory forecasting software is beneficial.

1. Increases efficiency & productivity: An inventory management system helps manage your products better during the entire production cycle. It also optimizes the supply chain management process. Using inventory planning software, you can determine manufacturing time, warehouse timelines, and stock requirements in warehouses.

With stock management software, you don’t need to do guesswork to make decisions. Instead, you can plan production and sales in a better way. You can predict how much stock is required for a particular warehouse and when it needs to be delivered. Inventory management software also helps determine safety stocks, so you don’t have to face situations like products going out-of-stock. You can make informed decisions of how much to produce and manage the proper allotment of stock to each warehouse.

1. Avoids stockout situations: If your product goes out of stock, you can lose your valuable customers. You need to have enough inventory in hand to avoid such problems. You can improve the production cycle and warehouse management if you know future customer demand well in advance. Using an inventory management system, you can align all the processes, such as production, supply, and marketing.
2. Maximizes product sales: Using inventory forecasting software, you can know the future consumer demand, plan strategies, and prepare to fulfill that demand in advance. You can carry out marketing activities according to the predicted increase in sales.
3. Avoids wastage of stock and space: If you produce more than what is required, it leads to wastage of stock and space. Warehouse costs aren’t cheap, and you might have to spend extra bucks storing extra supplies if you can’t predict the exact customer needs.
4. Reduces manual tasks: Stock management software reduces the manual efforts involved in researching to determine the future production cycle. Accurate inventory forecasting prevents overstock situations which in turn saves labor and warehouse costs. Advanced inventory management tools can pick product reorders, and labor needs to be required in the future. These processes are automated, so manual efforts are reduced and save time and workforce for other operations.
5. Saves costs: The warehouse management system helps to cut down expenses spent in holding the inventory. It determines how much safety stock might be required using a realistic approach, so there’s no wastage of products.
6. Customer satisfaction: What if your popular product goes out of stock? This might result in losing valuable customers, and there are chances they find an alternative to your product. By performing trend analysis, you can analyze which products will perform better in the future and focus on their production accordingly. This leads to customer satisfaction.

If you are looking for a sophisticated way to plan your sales and supply chain, inventory forecasting software is the solution. You can maintain a balance between demand and supply using the best inventory management software.

I work closely with B2C and B2B businesses providing technology-related content, including forecasting software, demand planning software, and more.