Forecasting – Put an End to Unplanned Stockouts

Forecasting – Put an End to Unplanned Stockouts image forecasting2Forecasting – Put an End to Unplanned Stockouts

Making sure you have the right stock on the shelves in the right amounts at the right times is an art form. A wholesaler talent that requires a feeling for what the market is going to do next. That said, you can make it easier with some help from the right computer science.

Don’t get caught short
Stock outs are not, by definition, a bad thing. Clearing inventory for seasonal goods at the right time shows a strong ability to predict trends and match supply to demand. However, top selling products clearing out too early, or promotional items that were intended to drive traffic being unavailable are not good scenarios for your business. Waiting for supply to catch up with demand tends to lead to a range of unpleasant issues, from back orders affecting planning to total operational standstills.

The feedback loop isn’t up to speed
So, why do stock outs happen? The feedback loop is at the heart of the problem. Information about demand is not reaching the personnel handling supply in the right timeframe. Smaller companies can usually manage with a timely phone call from the warehouse when the shelf is looking a bit empty. The problems start arriving when a business’ feedback system falls out of sync with increases in inventory volumes, wider product assortments and/or fluctuations in turnover. In short, the people operating on the shop floor aren’t able to initiate re-ordering in time. A critical point is reached where managing the relationships between lead times and sales trends becomes too much. It’s an indicator of a growing business, but at the same time, the problems can put reputations at risk.

Look back to see the future
Understanding the past will help you predict the future with more confidence and more accuracy. Having data available on previous industry behavior and past performance is invaluable in setting yourself up correctly. If some products follow irregular sales cycles and have challenging lead times, it’s essential for re-order points to be well planned if you’re to avoid customer disappointment. An ERP system that enables you to manipulate historical data into easily understood reports is a must, helping you to strike the fine balance between customer readiness and having unnecessary cash tied up in inventory.

Easy access, real-time
You need to know, at all times, whether you can keep the promises you’re planning to make to customers. Unfortunately, many businesses still suffer from staff picking and shipping outside the proper processes. And even if your policies are appropriate and strictly adhered to, an inflexible system that can’t give you the data you need quickly enough will still lead to stock outs. Getting good information about planned sales orders and your ability to meet them is essential. ERP systems can make direct insight a reality, using bar code scanning to update your system information the second something is taken from the shelf – a long way from the manual updating of spreadsheets. Setting warning limits will then help you to avoid stealth out stocking, particularly when used in combination with an automated purchase order system.

More Strategy articles from Business 2 Community ›

Loading...
See all articles from Business 2 Community

Friend's Activity