The Importance of Strategic Inventory Forecasting and Demand Management
The Importance of Strategic Inventory Forecasting and Demand Management
Retail businesses need to be proactive to stay competitive and profitable in today's continuously evolving marketplace. Whether they’re working to develop a strong brand, create personal relationships, provide unique products at an attractive price, or remain adaptable to changing trends, businesses must understand their target audience and determine the most cost-effective and efficient way to meet their needs.
But in order to meet customer needs, businesses need to have a handle on how to analyze current demand, forecast future sales trajectories, and determine the appropriate amount of inventory to have in stock. Although strategic inventory forecasting and demand management are integral to a business's success, they’re often overlooked. This only does a disservice in the long run!
When used correctly, marketing can be an excellent way to increase brand awareness and drive sales. Not only does it use engaging content to help differentiate your products from those of your competitors, but it specifically targets your ideal audience – you can focus your efforts on those people who are most likely to interact with your brand, saving you time and money.
It’s important to note that marketing efforts and inventory forecasting often go hand in hand. If your marketing efforts are successful, you can expect a high demand for your products. But if your inventory levels don’t match your customer’s needs, you’ll quickly lose out on potential sales. That’s why accurate demand planning and forecasting are crucial for sustainable, long-term success.
However, if you’re unfamiliar with the nuances of inventory management planning, there’s no need to worry. We’ll delve into inventory forecasting and demand management fundamentals and highlight three essential ways inventory forecasting can help your business succeed.
Keep Your Top Items In Stock
The first essential way inventory forecasting can help give your business an advantage is by keeping your items in stock at just the right levels. As you build up momentum for your retail business, you’ll want to ensure customers never have to wait for their favorite items. With strategic inventory forecasting and demand management, you can look all the way down to the item level to ensure you’re remaining in stock on your key items. Crafting both a high-level sales and inventory plan (top-down) and an item-level sales and inventory plan can help you avoid customer disappointment.
So how do item-level sales forecasts support instocks exactly?
With an item-level sales forecast, you can understand each item's sales history and future sales forecast. This allows you to better plan your inventory orders and support those sales expectations. Without getting to this level of detail, it's easy to fall into the trap of chasing inventory and continually falling out of stock on top items while other items build up unproductive inventory.
By doing item-level sales forecasts, you'll have the right mix of instock items ready to satisfy the demands of your customers – without spending too much on your inventory.
Stay Lean on Inventory
Speaking of saving on inventory, another way inventory forecasting can help you achieve your financial goals is that it can help you avoid unnecessary expenses. According to one study, about $163 billion of inventory is tossed annually in the U.S. For many companies, especially newly established brands within the retail industry, a large sum of capital is all tied up within their inventory, leaving them with very little wiggle room to invest elsewhere. Beyond the commitment of capital, excess inventory often leads to eventual markdowns or liquidations, which also eats into profits.
However, when inventory planning is used alongside sales forecasting, you can use data to drive decisions. By keeping inventory lean and strategically forecasting, you can reduce the likelihood of unproductive inventory on hand and optimize profitability.
Improve the Accuracy of Your Financial Plans
The final way that inventory management planning can help you achieve success and reach your financial goals is by giving you more accurate sales and inventory forecasts that can help improve the validity of your financial plans.
Right now, you may be doing a broad overview when it comes to inventory planning and calculating reorders. Or, maybe you’re one of the 43% of businesses that don’t track inventory at all. Either way, you’re drastically hindering your ability for growth when you’re not using the right strategies to forecast, plan, and execute.
Strategic inventory forecasting and demand management can help you avoid excess inventory that can potentially affect your total profit – unsold inventory reduces revenue, which is critical to your business's financial health and stability. Increasing the accuracy of your financial plan allows you the opportunity to focus on other aspects of your business that require equal attention. For example, you’ll better understand when you can afford to make other sizable investments or determine if you’ll need to raise additional capital to successfully maintain the trajectory of your business.
A solid financial plan for a retail business must be supported by accurate inventory forecasting and demand management.
Let Boon Tackle Your Inventory Planning
Running a retail business in today’s marketplace can be daunting. Not only do you need to ensure you’re offering the right array of products at the right price point, but you also want to keep them moving! But how can you alleviate some of the uncertainty associated with making important decisions? How can you ensure your retail business isn’t here for the right now but it’s here for the long term?
Inventory forecasting and demand management!
With strategic inventory forecasting and demand planning, your retail business can stay one step ahead, use resources more effectively, enhance customer satisfaction, and achieve its financial plan.
Boon’s flexible, hands-on inventory management planning allows you to capitalize on all three essentials to ensure business success. With Boon in your corner, you can attain item-level sales forecasts that allow you to keep your critical items in stock. You can also stay lean but impactful on inventory and maintain accurate forecasts.
With strategic inventory forecasting backed by decades of experience at some of the world’s largest retailers, you’ll know exactly what to expect in your sales to make more informed decisions. You’ll also better understand your customers' needs so that you can serve the needs of your business.
Contact Boon today to learn more about how our unique approach to inventory forecasting can help you reduce the need for any unnecessary expenses and boost your business’s likelihood of success.