The most basic function of inventory management is being able to accurately track goods on hand. In a multi-channel retailing environment, that task alone can be daunting. Understanding where an item is and how much of it in stock can be the difference between a satisfied customer and an upset one, proactive inventory planning also helps avoiding things like dead stock or unhappy clients as well. Being able to track inventory counts across multiple channels at a moment’s notice is the foundation for success in today’s marketplace. But precisely tracking current stock counts on its own is not enough to thrive. No, to do that you need to not only keep track of what’s on hand, but also be able to predict what will need to be. Demand forecasting can help you be the go-to option for desirable goods when consumers need them most.
The importance of knowing what you need
Consumers have an unprecedented amount of choice, both in terms of which goods they’ll buy and where they’ll buy them. Even if a business has a high amount of customer loyalty, if they don’t have an item when a customer needs it, that customer is likely going to go elsewhere. Offering alternatives like dropshipping can help save some folks, but not all. A manufacturer that is the sole supplier of a product isn’t immune from the need to forecast either. Being unable to accurately predict demand can leave anyone with either overstock or understock, which can cripple cash flow, inhibit growth, and harm supply chain relationships.
It’s important to remember that demand forecasting is not the same thing as sales projection. Estimated sales for an upcoming quarter or year is largely an internal metric. It influences budgeting decisions, which indirectly affects end customers, but it is not something that they’ll notice or comment on. Demand forecasting, on the other hand, can be the difference between a satisfying and frustrating customer interaction. In a world where almost any product can arrive at your doorstep in under 48 hours, people are simply not willing to wait around. Having too much can be just as bad as having too little. Tying up funds in inventory with no demand can lead to dead stock, sunk costs, and wasted space. The bottom line is no matter the size or sector of a product-based business, demand forecasting can have a huge impact on the bottom line.
Build a better forecast
Ask any seasoned retail buyer and they’ll tell you that their job is a mix of art and science. Consumers are notoriously fickle, and predicting the future is always going to be a speculative endeavor. As Jamie Dimon once said, “No one can forecast the economy with certainty.” That same goes for predicting future customer demand. Over time, though, the science of forecasting has begun to outpace the art.
From fourth down decisions to YouTube recommendations, big data is shaping decision making. Understanding previous inventory patterns—whether based on seasonality, new releases, specific product lines, or any other factor—may not be a crystal ball, but it certainly helps defrost the glass. The more lenses through which a business can analyze their inventory, the more informed they can be for the next buying or manufacturing cycle.
The AccountingSuite difference
AccountingSuite offers robust inventory tracking and reporting features that are equipped to handle today’s marketplace. Small and medium-sized businesses shouldn’t have to spend an arm and a leg to get reliable data that can help them better understand their inventory. Quality accounting software shouldn’t provide good enough; it should seek to provide real value that improves operations and propels growth. With its best-in-class inventory features, AccountingSuite is able to do just hat.
Head to our inventory management page to learn more about what AccountingSuite can illuminate about stock.