Demand Forecasting-Cut Your Inventory Costs Dramatically!
Using strategic inventory management and forecasting software, most businesses can decrease their inventories by 20% or more. The cost of tying up money in overstock inventory is obvious, but under stocking inventory is even more damaging to your profits. Every time you don't have what your customer wants you risk losing that customer to your competitors.
We do consulting and training on Inventory Management for many companies. Click here for further information.
Unproductive and overstock inventory has a negative effect on your net profits of about 25% of its value. If the value of present inventory is $1,000,000, you have the potential of reducing it by $200,000 while reducing the amount of out of stock situations. Demand forecasting will increase your cash flow and save your company the yearly carrying costs on that inventory of approximately $50,000.
Your present computer system is probably tracking thousands of bits of information about your customers' purchases and inventory activity. You may a have stock control program that use minimums and maximums to control stocking levels. Do you know that these new techniques can be up to 30 times more accurate than the Min/Max or the "moving average approach?"
The problem with using a Min/Max system is that these levels and order quantities are based on past sales only, not current usage rates. For items that are best sellers, you probably are carrying too much stock on a day-to-day basis, and on items in less demand, you're probably backordering more than you should. Can you afford to stay where you are?
Advanced inventory management techniques and computer models are available to you now.
It's impossible to manage your inventory most profitably without using these "state-of-the-art" statistical forecasting techniques. Northeast Business Services (NBS) offers your business the same forecasting tools that many of the Fortune 500 companies use. They can train your staff in advanced inventory control techniques, transforming inventory control from "guesses" and "gut-feelings" into a science. Don't be intimidated by their power. NBS hides the complexity of these tools and makes them transparent to your company.
Demand forecasting depends more on balanced estimates of future sales than solely on history. Historic data is important, but it's a bit like rowing a boat. You have to sit backwards and row hard. Often, however, you need to look ahead for obstacles in your way. Professional forecasting tools will do both for you--look behind to your history but also ahead to factor in projected future sales. You'll run out of stock far less and build a better relationship with your customers. And in decreasing inventory overhead, you'll have more cash flow.
Inventory demand should be based on your customer needs and timing, and maintained at an optimal level within your working capital limitations. You have a choice to make: invest in inventory or investing in information. By choosing information first, you'll have additional capital resources to use in new products, marketing or as you chose to increase profits. Invest only in inventory and it may sit there. The cost of implementing this process is minimal compared to the savings you'll realize.
Northeast Business Systems (NBS), as your computer systems specialists, will custom design programs to integrate with your company's existing software (even proprietary programs). Investing in advanced inventory control techniques will give you one of the fastest returns on investment you can make in your business. It will also be time-saving--instead of trying to manage an unmanageable inventory, spend that time concentrating on selling more to your current customers or prospecting for new ones.
Please contact us if you would like any further information on how demand forecasting can reduce your inventory and start saving your company money today.
Send mail to info@strategicbusinesstools.com with questions or comments.
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