How to Nail Inventory Forecasting when You’re a Small Business
If you’ve ever looked at a weather forecast, you’ll know that the task of predicting the future is an inherently difficult one. Yet as a small business, you’re expected to generate an inventory forecast. So how do you do it accurately?
In 1987, BBC meteorologist, Michael Fish, infamously downplayed the risk of an approaching storm hours before a once-in-a-century cyclone tore apart regions of the UK.
Needless to say, when 22 people died in the ensuing hurricane-force winds, Fish’s watered-down forecast of “it will become very windy” but “don’t worry” came under immense scrutiny.
Whether your a business owner, Supply Chain Manager, or just a Vitamin D enthusiast, human beings are obsessed with trying to work out what tomorrow has in store for us.
Is this any wonder? How many times do you hear ‘fail to prepare, prepare to fail’? It’s one of the oldest truths in business: if you don’t plan for what might come next week, next month or next year, all of your good work can unravel.
In the world of small business, where every penny counts, having an accurate inventory forecast is a matter of survival.
Why is it so hard?
What’s your process for creating an inventory forecast right now? Most of the time when I talk to our customers, I find out that it’s a haphazard approach that yields inconsistent results.
Most people can point to a spreadsheet. Sometimes, they’re ignored altogether because they’re too technical and prone to containing errors. In this group, there’s a number who find it easier to walk around a warehouse and attempt to search for low stock rather than consult a maze of cells and calculations in Excel.
Perhaps your response to this question is similar — but it’s not the way you like to conduct yourself or your business. People like certainty, which unfortunately isn’t a luxury that inventory forecasting can supply.
Think about everything that could go wrong. Or save your nerves, and skip the next sentence.
…Your supply gets hampered by an international trade war; your supplier sends the wrong product; BREXIT!; you over-ordered for stock with sluggish sales; there’s a major to disruption to shipping…you get the idea.
An art and a science
When it comes to inventory forecasting, you could go to university and do a degree where you learn this discipline in depth. Forecasting is a medley of art and science that allows skilled individuals to cast their gaze into a crystal ball and make predictions that shower more heavily-backed organisations with cost-saving and revenue-generating benefits.
Experienced forecasters are worth their weight in gold. Imagine never running out of stock and being able to honour every sale in a timely manner, while at the same time having just enough stock to cope with fluctuating levels of demand (more on how you can achieve that with your small business later).
But unless you’ve take a masterclass in inventory forecasting, you probably didn’t get into the business you’re in to learn about ins and outs of inventory forecasting.
You have other priorities. Time spent on inventory forecasting faces competition from issues relating to employees, sales, growth, stakeholder relationships, the environment, strategy and an endless list of to-dos.
Without the know-how, the execution of inventory forecasting can feel like holding up a wet finger in the air to see which way the wind is blowing in the Sahara Desert. The accuracy is somewhere between not at all and very questionable — but still, the forecast has to be done.
And here’s the catch
When you’re depending on gut-feel, you’re gambling with real cash that your business depends on to survive. Whether those are small but consistent errors that result in death to your business by a thousand cuts, or a stock-out issue on the eve of your biggest-selling weekend that keeps you awake in a panic all night, it’s no wonder that some small businesses refer to poor inventory control as the silent killer.
So what do you do when you have a fraction of the resources that larger organisations have?
The good news is, you certainly don’t need to give up on creating a credible forecast for your business.
With the proliferation of SaaS (Software as a Service) tools like StockTrim, it’s become easier than ever to access historically expensive and complicated processes — including inventory forecasting.
StockTrim is built from the ground up for only this purpose to help people like you.
Small businesses using our app have been able to cut the time they spend doing inventory forecasting by up to 80 per cent. That you means you can get on with your competing priorities and feel significantly more confident about your forecasting at the same time.
Plug into one of our growing list of integrations (or upload a CSV) by signing up for a free 14 day trial account.
Here’s a tip — make sure you click onto the dashboard and look at the cost of your excess inventory and stock-out risk. You will probably be surprised!
This article was originally published at StockTrim.com.