How Data Best Practices Can Improve Inventory Planning and Forecast Accuracy?
For global logistics to be successful, inventory planning is essential because they enable you to maximize your inventory levels, prevent stockouts or overstocks, and cut expenses and waste. However, how can you guarantee that your projections and goals, particularly in a volatile and uncertain market, are correct and trustworthy?
When it comes to maximizing inventory levels and availability, planning solutions can be quite helpful, but what happens if the data entering the system is inaccurate? Or perhaps when the information gets into other operational areas?
Finding the problematic areas in the inventory data stream can help maximize a solution’s ROI and enhanceinventory planningand accuracy because a planning solution is only as good as the data entering the system.
In this post, we’ll explore different techniques and resources that you can utilize to measure and improve the effectiveness of yourinventory replenishmentand demand planning.
Why Accurate Data is Crucial for Inventory Planning?
Incorrect inventory data can affect other aspects of operation, such as store KPIs, customer availability, spoilage, and sales, in addition to hindering the best use of a planning system.
Data inconsistencies don’t just have an impact on shop operations, either. Over the course of a network of stores, even the smallest errors mount up to much larger losses. At worst, this inaccurate inventory can result in financial loss from spoiling and lost sales, and, at the very least, it will require a lot of time-consuming human work. While manually entering these figures again might help with the issue, doing so eliminates the advantages of starting with an optimal inventory planning solution. Finding the potential problems with the initial data collection is a good place to start when looking for a solution.
Set Goals and Metrics
Before you can start forecasting and planning for inventory planning, it’s important to establish your objectives and metrics. What are your goals for managing inventory? How will you measure success and progress? For instance, you might wish to balance your inventory turnover and fill rate, reduce your inventory holding expenses, and improve your service level. You can select other metrics to track, such as inventory accuracy, forecast accuracy, forecast bias, forecast error, demand fluctuation, or inventory days of supply, depending on your objectives.
Apply Historical data and Trends
Utilizing historical data and trends is one of the most popular and efficient strategies to forecast and plan your inventory. To find trends, seasonality, cycles, or anomalies in your demand, you can examine your previous sales, orders, shipments, returns, and other pertinent data. To enhance your analysis and make the appropriate adjustments to your forecasts and plans, consider incorporating external data. This can include factors like market trends, consumer behavior, competitor actions, or economic indicators. However, it’s important to be aware of the limitations and assumptions connected with historical data and validate its relevance to both current circumstances and hypothetical future scenarios.
AI Led Automation
To generate accurate and reliable predictions and plans, it may be necessary to utilize a range of forecasting techniques and models. The specific approach chosen will depend on the nature and complexity of the demand being analyzed. If you wish to record subjective aspects or preferences, for instance, or if you have little or no historical data, you can utilize qualitative approaches like expert opinions, surveys, or market research. When you have enough trustworthy historical data or you wish to identify objective features or links, you can also employ quantitative methods like time series analysis, causal analysis, or machine learning. Additionally, you should take into account the level of information, regularity, and time horizon of your projections and plans before selecting the proper techniques and models.
Utilize a Collaborative and Integrated Approach
Implementing a collaborative and integrated process that includes all the essential stakeholders and functions in your supply chain can also help you enhance your inventory planningand demand forecasting. To help your sales, marketing, operations, finance, and logistics teams communicate and work together effectively, you can use a framework like sales and operations planning (S&OP) or integrated business planning (IBP) to align your demand and supply plans with your financial and strategic goals. By utilizing the combined knowledge and experience of your organization, you can ensure that your projections and plans are accurate, practical, and adaptable to changes. This allows you to harness the collective wisdom within your company and make informed decisions for future success.
Analyse and Monitor Your Results
Finally, you should routinely review and assess your performance and results and use the comments and insights to enhance your demand forecasting and inventory planning. Your critical metrics and indicators, such as forecast accuracy, forecast error, inventory accuracy, inventory turnover, service level, or customer satisfaction, can be tracked using dashboards, reports, or analytics tools. To find the causes of errors, deviations, or hazards in your projections and plans and to test the effects of various assumptions or actions, you can also undertake root cause analysis, scenario analysis, or sensitivity analysis. By implementing these practices, you can enhance yourinventory planning by analyzing past mistakes, adjusting procedures and models, and making necessary improvements.
About the Company
Fountain9 presents Kronoscope, a cutting-edge inventory planningtool powered by AI. This innovative tool provides businesses with the ability to accurately estimate demand for each individual SKU item. This allows them to enhance customer service and increase profitability.
Demand sensing and a price engine, which take past sales trends, seasonality, holidays, markdown occasions, and pricing swings into account, are sophisticated elements of Kronoscope. The software uses this data to analyze pricing strategies and estimate inventory needs with accuracy. Businesses can choose the best suppliers and calculate the right inventory replenishmentquantities by fusing expected demand with supply-side data, which helps them avoid stockouts and minimize inventory waste. Businesses can arrange their inventories optimally with Kronoscope, giving them a market advantage.