Although small businesses usually handle a relatively small inventory compared to big companies, that doesn’t make accurate inventory forecasting any less challenging for them. New technologies and automated solutions can help small businesses improve their sales and inventory forecasts, but even the best technology will be ineffective in the face of bad inventory forecasting practices. Here are some of the most common bad practices small businesses should avoid.
Not using an effective sales forecasting inventory tool
Due to the complexity of the calculations involved, sales forecasting for inventory purposes cannot be left to guesses, assumptions, or error-prone manual calculations. The simplest and most cost-effective way for a small business to generate accurate forecasts is to use an inventory control and planning solution that comes with an integrated sales forecasting tool that draws on existing inventory and sales data to produce consistent forecasts.
Allowing expectations to influence forecasts
Unrealistic accuracy expectations are a common cause of bad inventory forecasting. They can be eliminated by implementing a sales forecasting, planning, and control system that is firmly grounded in data and uses automation to improve results. Without such a system in place, sales forecasts can be off the mark on a regular basis.
Relying too much on inventory forecasting
While inventory forecasting is a powerful tool for any business, an over-reliance on it, which is often the result of failing to balance demand forecasts with supply planning, can be a steady source of woe for any business. A sales forecasting inventory tool is only one of the tools a small business can use to effectively control its inventory and maintain optimal stock levels. For example, without accurate inventory tracking and the understanding and insight that business intelligence can provide, sales forecasting is seldom effective.
Not reviewing automated forecasts
Companies as big as Nike have lost millions of dollars due to inadequate management review of forecasts. Inventory and sales forecasts are there to guide the decisions of business managers and owners, but judged out of context and without regard for seasonality and past inventory performance can result in major blunders. What’s more, because the inventory team doesn’t have access to as much data as the management team, it may not always be possible for them to make the best decisions based on available forecasts.
Not maintaining accurate sales and inventory data
The quality of sales and inventory forecasting for small business ultimately depends on the accuracy of existing sales and inventory data. The forecasting system itself may be accurate, but if the data is not, inventory control and management becomes a lot more challenging. Even when an automated inventory system is in place, it is still necessary for the management to assess the existing data, looking for gaps, inaccuracies, and any other issues.
To help simplify inventory forecasting for small business, DataQlick comes with built-in sales forecasting capabilities that rely on existing inventory and sales data to create individual predictions for every item in stock. You can learn more here.
