Poor forecasting or demand planning one year on
Last year I wrote a blog on how “Poor forecasting or demand planning can damage your business” so 12 months on does this stand true? The answer is yes, inventory management is key coming up to the Christmas period.
Inventory Management
Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.
Effective Inventory Management
You goal during this busy period should be Effective Inventory Management. How do you know if you have an effective inventory management system, well it comes down if you can answer these two questions:
1: have you a reliable forecast of demand
2: Can you estimate your holding costs, ordering costs and shortage cots
Goal of Effective Inventory Management
So if you have an
Effective Inventory Management system what should be you goal? The goal of any effective inventory management – that is, to meet or exceed customers' expectations of product availability while maximizing your companies net profits or minimizing its inventory related costs. One of our primary areas of concentration has been the improvement of future predictions of product sales or usage, otherwise known as "demand forecasts." the accuracy of any demand forecast is dependent on the "goodness" of your sales or usage history. Does this data truly reflect what would have been sold or used under "normal" circumstances?
If you are looking to improve your Sales & Operations Planning, read our whitepaper on Top 10 Home Truths on Sales and Operations Planning. Our intent with this whitepaper is to help validate the Sales & Operations Planning processes that your company may be doing well and to highlight the areas that you should consider improving upon to realize greater value.
