One of the most difficult parts of holding an inventory of products is knowing when to re-order more stock. Thinking about it logically, one would guess that this could be predicted based on sales analysis and lead-time of stock delivery. This assumption would be mostly correct. By conducting a sales analysis, one can reasonably predict how much stock they will sell on any given day. Furthermore, accounting for lead-time of delivery of stock brings you closer to ensuring that you know when to re-order.

Unfortunately these methods just aren’t enough. While helpful, using a sales data analysis and lead-time of delivery is simply not going to guarantee that you don’t run out of stock. This is mostly due to unforeseen circumstances and variables that cannot be accurately accounted for. These circumstances and variables include:

  • Unexpected delivery delays by the supplier — Sometimes suppliers have unforeseen problems with their own stock and this can end up delaying your delivery.
  • Unexpected customer sales — This is when your business sells more than was forecasted and thus you run out of stock sooner than anticipated.
  • Unforeseen influencing factors — Sometimes particular stock products can become ‘in-fashion’ and start to fly off the shelves, as they haven’t done so before. This is something that is very difficult to predict.

Accurate Forecasting for Small Business — Using a Reliable Sales Forecasting Inventory Tool

For all reasons stated above, when ordering stock, we need to factor in “safety stock”. This is stock that covers us when these events occur. Now, there’s a very complicated piece of statistics that can be used to get this, but if we were to carry out the calculation for each stock item in our inventory it would take weeks or months. Instead, a sales forecasting inventory tool or an inventory control system can perform this calculation. The calculation can be performed for each stock item in a matter of seconds.

Another item task that the inventory control system can undertake is monitoring stock levels to see when the “re-order point” has been reached. The re-order point is the point at which the stock gets low enough that it’s time to order further stock. This is an important task that can be implemented automatically with this kind of system when the point has been reached. By using re-order point you are guaranteeing to a high degree of certainty that you will never run out of stock.