3 Effective Inventory Forecasting Methods for Manufacturers
Posted on: June 29, 2016 | By: Craig Thompson | QAD Manufacturing
For many manufacturers, managing and forecasting inventory levels can be a challenge; especially without a high functioning ERP system like QAD to help keep things in order. Manual inventory processing, while effective can prove to be, at times, unreliable due to human error. Luckily, there are practices in place that can help simplify inventory forecasting for manufacturers without a total overthrow of your current practices. Inventory forecasting is important and if done correctly can save your company a lot of time and money, capitalize on this opportunity through the use of these effective methods.
Unify your data
One of the biggest pain points that manufacturers face when forecasting their inventory levels is a lack of unified data. Outdated ERP systems cannot provide the insight into inventory across multiple locations that your manufacturing company will need to grow and can often waste time trying to track orders or inventory levels that are “out there somewhere”. There is nothing worse than knowing you have the inventory that you need but not being able to locate it. On top of all of this, miscommunication can lead to backorders and vendor lag time; damaging your reputation and financial standing.
Being able to identify the various types of statistical data available for forecasting and how you wish to use it is your first step. Demand planning and forecasting can be tough, so it's so very important to understand just how much you are expected to sell and the buying trends that your organization may face. Involving the entire organization in a singular common set of statistical data to forecast operations is one effective method that your manufacturing business can use. Automated ERP software like QAD can also help identify seasonal trends and keep real-time views of your operations to optimize your purchasing power to limit the financial burden of having to rush orders and turn away customers due to lack of inventory.
Qualitative vs Quantitative Decision Making
In a perfect world, there would be no need for technology and extremely limited room for human error, unfortunately though this is not the case. When determining the type of forecasting method that your manufacturing business should utilize it is important to determine just how your collected data is going to be analyzed. In some organizations, managers prefer to perform forecasting activities manually based off of their own judgement and analytics. That being said, there are many effective and accurate business management software's that are tailored specifically to the manufacturing industry. These systems take the guesswork out of inventory forecasting and take quantitative a more quantitative approach to this process. Real-time, detailed and accurate statistics are combined automatically, saving your management team time and money without compromising accuracy. Take human error out of the equation with QAD ERP.
When planning to effectively forecast your inventory levels it is important to consider both the life cycle of your products as well as how far in the future your forecast must reach. When it comes to the life cycle of your products, understanding how much stock to keep of certain items to avoid waste is very important. For example, assuming that your most expensive items are also your mist profitable may not always be the case and could actually prevent cost flow when lower costing items have a higher turnover rate. Understanding how to balance inventory levels when forecasting can be beneficial to your budget. Knowing just how your products and sales effects your business is key for any businesses success.
As for considering the timing of your forecasting and how far in the future your plan should last, make sure you understand just how each wavelength effects your business and find what works best for you. For some businesses, a sales forecast for the next week or month may be completely different than a forecast for the next year or two. Knowing your organization inside and out is crucial for driving revenue within your organization.
Understanding how to best forecast for your manufacturing business is crucial for promoting growth. Don't let dated ERP software or ineffective strategies damage your inventory. QAD's innovative cloud ERP software was built with the manufacturer in mind, contact Logan Consulting your Chicago based QAD partner for more information on how QAD could help simplify your inventory forecasting process.
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