How to Improve Your Retail Supply Chain: Demand Forecasting
We can’t stress enough the importance of supply chain management. If there is a problem in your supply chain and your products cannot reach their destination on time or at all, you run the risk of losing those customers forever.
If we lived in a magical word with no budget and space limitations the simple solution would be just to order and stock more items. But how much is enough and not too much? Even to the best-run shops, getting stuck with more products than they can actually sell is a great fear. This is true, especially if space and budget are limited. The answer to this problem is data analysis. And by data analysis, I want to introduce you to demand forecasting.
Demand forecasting used to be something only explored by experienced retailers. However, these days it’s easy to benefit from it even if you are just entering the retail business. All you need is the ordering history of your product lines – the longer the reference time the more accurate your forecasting will be. Once you start using demand forecasting it will allow you to know when to order to restock your products and how large that order should be. That’s valuable as it locks the minimum amount of money in your warehouse while also ensuring product availability for your customers’ requests.
As supply chain management revolves around managing multiple players in the industry it means optimizing processes spanning a number of geographic locations (warehouses, packers, transport, points of sales, etc). Although it would seem obvious to use the internet as a location-agnostic platform to coordinate all this, it is not yet the common practice. So, a way to beat the competition is to use cloud-enabled services (rather than a locally hosted solution) to cheaply integrate and monitor each link in the supply chain (probably across different geographic locations and distant business entities).
Many retailers – esp. of the new ecommerce breed – have no system or process in place for their supply chain, to begin with. Even adopting some standards and using accepted best practices is at least something. One way to do that is to hire an expert to show you how – the other is to use dedicated supply chain management software which has the best practices embedded. Simply bending the way your business operates to a high-quality software implementation of a supply chain process will allow you to leapfrog the competition.
Kostis Mamassis is the founder and CEO of Megaventory, the online inventory management system that can help small businesses synchronize stock and manage purchases and sales over multiple stores. Since 2007, he is lecturing software development at the Department of Financial & Management Engineering (University of the Aegean) and is actively involved in numerous research and non-research projects related to transportation and logistics.