Why Demand forecasting is no longer an option for retail owners
Demand Forecasting! It’s the buzzword every business owner hears so much these days. Every retailer dreams of the day when everything will run as it should, when hurries, worries, and sleepless nights become a thing of the past. But let’s face it: Most of us know forecasting is both an art and a science. And no matter how big your business, you need consistent, accurate forecasts.
Retail businesses are no exception. Consumer behavior is constantly shifting as technologies change and competitors pop up. Just imagine how much uncertainty there is for thousands of retailers today. That’s a lot of lost sleep and wasted money in overtime and on stockouts! It’s hard to measure the impact of unforeseen disruptions, but it is clear that they’re costing retailers $200 billion every year alone in the US. Now that’s a lot of stockouts!
Is demand forecasting just a trendy bandwagon, or is it something every retail operator should be doing? The simple answer is, it’s a must, and here’s why. Major global retail businesses would probably like this to be kept a secret, but forecasting is the only way retailers can stay profitable over time and scale. Simply put, accurate forecasting shows you the way to success. And if you know which way to go, getting there is so much easier.
Imagine trying to get from one place to another without a map. You get to the first crossing, only to guess which is the right way forward. So you follow one path to the very end, only to find out you took the wrong turn. Okay, you go all the way back to the beginning and try a different direction. What a waste of time and effort! Knowing where you should be headed is so much easier. And don’t forget, like in your car, it’s useful to have an online navigation system that helps you avoid traffic jams and optimizes the route as you drive.
Demand planning is the same. It shows you the way, in real-time. It guides your retail business to profitability. But that’s not the main reason you should use it. The simple fact is it helps you sleep better at night. Demand forecasting is your one-way ticket to the retail gates of Paradise, with better mental health, more sleep, and improved sales results on the way.
How to do demand forecasting
So how do you come up with a forecast that will enable your business to grow? That’s the million-dollar question. No one ever said it was going to be easy, but here at Inventoro, we’ve made it 10,000 times easier for retailers. Welcome, retailers big and small, to the era of online demand forecasting!
How does Inventoro create the forecasts that will help your business grow? It reads your past sales data, then learns from those numbers, and forecasts future demand from there. But that is a simplistic answer, and you’re not a simple person, are you? You need more details, right? So here goes:
“We source your past sales and inventory data two years back, checking purchase and sales prices for each item” We look at all of your SKUs, both overall and independently to point of sales. We even track products’ warehouse location, treating each item individually, even if they appear more than once in your organization.
We then run over 100 algorithmic functions for each item alone, to create forecasts for each SKU and every location. The algorithms aren’t always the same; each is used for a different scenario. Some of them are mathematical functions, some use deep learning and neural networks to get the best results. Some are good for sporadic sales items. Some are great for highly seasonal demand. Inventoro finds, over time, which algorithms work best for each and every SKU.
Multiple forecasting algorithms
Deciding which algorithm works best requires that we let them compete to see which ones yield the best results. We check those results to see which algorithm creates the most accurate forecasts. We do this test on past data so we can see which one works best in a given situation and for a given SKU, so we know now which algorithm is the best for all your SKUs. Then we’re ready for the next step.
An ABC analysis of your portfolio helps you see which of your items need special care and which should be considered ‘zombie inventory’. Then we cross reference our forecasts with your remaining inventory to determine which items need to be replenished and where, all based on your inventory strategy and defined service levels.
Forecasting leads to replenishment
Finally we create a purchase order recommendation to tell you what needs to be ordered and when, so you don’t have overstock on the one hand while at the same time you don’t experience stockouts. Then it’s as simple as downloading the resulting excel sheet and purchasing the stuff you need.
Let’s not forget one more important thing. We do this every single night. That’s billions of calculations every single day, because we know you want to sleep at night.”
Sounds complicated, doesn’t it? Well, the really complicated part was creating the system that does all these things automatically. We did that for you, and then we put it online. Now anyone can forecast with high accuracy. Taking such a sophisticated system and turning it into an affordable online app is something major retail players will not be happy to hear because that’s their competitive advantage over the little guys. But we want a more level playing field for everyone. Helping smaller businesses to compete on the market is our goal.
We are the Robin Hoods of Supply Chain Management, and we’re proud of that.
Demand forecasting makes businesses leaner
Stronger forecasts are an opportunity for businesses to stay lean and efficient while boosting their top-line. This is exactly what we help our clients achieve. Inventoro demand forecasting software gives you the most accurate forecasts. Highly accurate forecasts that could take weeks only take a few hours. And the best part is that once you know how much to stock, you’ll never be caught short again.