Inventory management and demand forecasting must be an executive issue. This critical business function is too important to be the sole responsibility of the warehouse manager or junior staff members.
Management across various industries is becoming more aware of inventory management and demand forecasting issues for several reasons:
- As companies grow, the variety and quantities of inventory grow and need to be managed more effectively.
- In manufacturing companies, as much as 50% of capital is in inventory.
- The major cost component of many products has shifted to materials.
The link between effective inventory management and cash flow is now recognised as very important and the key to any business. Although inventory is listed as an asset on the balance sheet, it creates liabilities by incurring storage costs and tying up cash and working capital.
Inventory comprises the items that an enterprise needs to maintain production, provide customer service and support activities such as maintenance and repair. Inventory exists due to the uncertainty surrounding demand or supply; inventory is an expensive asset which needs to be carefully managed and controlled. Complex decisions have to be made about how much and which items a company should hold overall and at each stocking location.
Additionally, the company needs to know when to replenish, how much and where. The role of inventory management and demand forecasting is to coordinate the actions and requirements of a business so that stocks are maintained at the right place, at the right time, and in the right quantities to satisfy the demands of customers or a production process.
A spreadsheet can manage inventory sufficiently when there is one warehouse holding a limited number of inventory items with a small storage area and a few customer orders. For larger, complex environments, a more sophisticated type of software is required, like that of Intuendi Demand Forecasting Software, to help move from ‘managing by exception’ to ‘managing by information’.
Effective inventory management and demand forecasting should be a priority for any company or online retailer. These businesses need a unified view of inventory that can only be achieved with demand forecasting software.
