The accuracy of the inventory forecasting model you use can impact the profitability of your small business. Whether you manufacture goods or only sell them, inventory forecasting is one of the pillars on which you base your stock strategy and revenue projections. Your forecasting tool for small business has to accurately handle predictions accurately before you can use your forecasting data effectively.
Quantitative Inventory Forecasting
Quantitative forecasting relies on past sales data that can go back years to predict inventory demand. With this model, the more data you have, the more accurate your predictions will be. Straightforward and effective, this forecasting model is reliable for long-term forecasts. However, seasonal changes in demand, coupled with unstable market conditions can render it less than perfect. It is vulnerable to both highs and lows in demand, leading possibly to both overstock and understock.
Qualitative Forecasting
This forecasting model takes into account extrinsic factors such as economic demand and market forces. It’s a model that inventory planners sometimes favor. If your team includes a planner, you may feel confident enough with his or her expertise to allow them to do qualitative forecasting. For most small businesses, though, qualitative inventory forecasting proves too expensive to be worthwhile.
Who Does the Math?
If you choose to rely on the quantitative inventory forecasting model, as most small businesses do, it’s crucial to consider who does the math. Sifting through all past sales data isn’t an easy task, and while you can hire someone to do it for you, the cost and the error-prone nature of the task makes it less than ideal.
A far better way to implement the quantitative inventory forecasting model into your small business is to use a forecasting tool for small business. A simple online inventory app like DataQlick can work out the numbers for every item in stock, providing highly accurate forecasting data based on proven statistical models.
The quantitative model works well with both major stock monitoring strategies — continuous review, for a predominantly fast-moving stock, and periodic review, for slower inventory turnovers.
Being able to draw on your accounting data for past stock performance can improve the overall accuracy of your predictions. Choose an inventory forecasting tool for small business that easily integrates with your accounting app.
With an online app like DataQlick, you can take the hassle out of quantitative forecasts. Get a taste of it to understand just how easy it is to get accurate forecasts with it.
