The different types of inventory forecasting and making inventory forecasts, based on its needs. Those who manage a business should be aware of the main types of forecasts that they can make to help them in their work. All types of inventories are made by forecasting the type of inventory that is required by a certain company.
Inventory forecasts are made when a business needs to know what the current inventory will be a year, half or one year from now. A person may start a business and sell a new product. The new product may have to be brought in or it may be shipped to an existing customer. In either case, the information about the order should be supplied so that the business owner can make predictions about how much it will cost to deliver the product to customers.
With the changing trends and the demand for products people are always looking for a better price on items they have or want to purchase, the old inventory gets sold and the new product is introduced. The change has a positive effect on the prices of the old and new products. There may be a need to reduce inventory at the present time. The business owner can forecast the need for the supplies to be purchased and reduced by eliminating excess or obsolete products.
Inventory forecasting is a process that will help a business to prepare a plan for setting up, when the new product will be introduced to the market. It may also be used to make a change in the way the current product is used. There may be a need to reorganize the operations to meet the changed situation.
Any business, even if the new product does not sell in the first few days it is introduced, will need to reduce inventory levels as soon as possible. Businesses that cater to a specific niche, will need to have lower or no inventory levels as soon as possible. This way they can concentrate on their niches and not try to cope with a sudden rise in demand for their products. Most new products will be able to be delivered to the customers within one or two weeks, if they are ordered according to the delivery schedule.
To have a good forecasting system the owner must have clear instructions about the target of the forecasting. The success of the forecasting program depends on how the manager communicates with the people handling the forecasts. Once the manager decides to use forecasts they should be carried out regularly.
The managers should set targets according to the requirement of the business and each forecasting process should be checked after it is started. Statistics should be collected and the forecasts made on an annual basis, to help monitor the inventory level of the business.
If the business has certain rules for moving inventories, the forecasts should comply with those rules. It is a mistake to introduce a new product without having a plan for that product. For example, a new product will not be launched if there is already a very large supply of an existing product.