Inventory Forecasting - Marello: Open Source ERP for Commerce
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Inventory Forecasting

Taking advantage of forecasts to measure future demand.

According to industry statistics, stock-outs cause a projected $25 billion in losses every year. With accurate forecasting, retailers will never need to worry about out-of-stock situations again. The lack of clear, timely, and reliable forecasts — especially during product promotions — is often the cause of hiccups between supply and demand.

 

Marello compiles forecasts to measure future demand based on a range of criteria, including historical demand, overall trends, product promotions, and seasons.

 

What is Inventory Forecasting?

The worst that can happen to businesses? Having no products to sell. If you run out of products to sell, customers will look for other providers. In inventory management, it can be hard to know exactly how many products are available for sale. Items can be sold but still show up in stock levels (for example because they have not been shipped yet). This may lead to selling products that are already sold, resulting in longer delivery times and disappointed customers.

 

These problems can be solved by placing the right amount of purchase orders, at the right time. Yet this is harder than it sounds. All it takes is a spike in demand, or one delay in receiving new inventory to risk running out of stock.This is why businesses need Inventory Forecasting. By combining sales history, trends in demand, seasons, average purchase delivery times, a reliable purchase advice can be created.

 

What are the Benefits?

Measure and forecast sales trends

Many eCommerce businesses plan purchases of new inventory on a certain date, or when their stock reaches a certain level. However, a static re-order does not always suffice, especially when sales fluctuate over time. Sales trends are the biggest factors when determining how much inventory is needed at specific times.

 

In order to calculate how much stock is needed, and when products should be reordered, Marello looks back into historical sales data. Marello’s inventory forecasting calculates an average of items that are expected to sell during a specific period. It takes into account certain trends, such as seasons, holidays or special events which can change sales demand.

 

Forecast inventory safety

Businesses do not sell the exact same number of products every single day. Supply and demand are more organic than simple math can calculate as in many products fluctuations often take place. That is why it is important to build is some surplus stock in order to assure inventory safety. Having extra stock is needed during spikes in demand or when there is a delay in receiving new inventory.

 

This buffer is called safety stock. It ensures that businesses do not run out of key products. The amount of safety stock is calculated by looking at popular demand, trends and the sales history of products.

 

Set reorder points

Lastly, it is important to know when to order new stock. By looking at leadtime, demand and safety stock, Marello will define when new products should be ordered in order to keep up ultimate stock levels.