How stock forecasting can prevent a nightmare before Christmas

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Key to a distributor’s job is not just the ability to successfully move products from A to B, but to be able to foresee demand and ensure stock is managed effectively. Both are crucial features of the service we provide, and enable us to add further value to our work.

As we find ourselves about to dive head first into Black Friday/Cyber Monday and subsequently the festive period, having an efficient forecasting model and being able to successfully manage stock is going to prove itself increasingly central to impressive sales. Accurately forecasting demand impacts not only upon the availability of stock available to each retailer, and so resulting in the opportunity to buy for consumers, but also enables retailers to bulk purchase enough themselves, thus reducing the cost of each order and resulting in less unnecessary holding stock. The lead time between ordering and receiving stock, which can be some length depending on the supplier, is also a key reason to successfully forecast to ensure stock is available at the right times, particularly around Christmas when time is a particularly valuable commodity.

The two types of forecasting usually employed are either one of or a mix of either quantitative or qualitative forecasting. Quantitative forecasting adopts a more mathematical approach, basing its suggestions on historical data, a method that is useful to build up a fairly accurate picture of how sales and demand may look over the course of a given time frame. The primary issue with this way of forecasting is there are often variable issues that crop up that aren’t always accounted for, such as variable market conditions or product seasonality, that can skew forecasts.

Qualitative forecasting on the other hand is a less precise model, basing figures on less measurable factors such as market forces, economic demands and potential demand. While less geared towards hard figures, this form of forecasting is often carried out by inventory planners who have a history of practice, and allows more room for applying suspected variables that might have an impact upon sales numbers, such as unconventional market or economic activity.

Implementing some form of review of stock can similarly provide a better understanding of how we should be forecasting and how our stock is best managed. These reviews are often divided into continuous and periodic reviews, the first involving a regular, ongoing review of stock, the second in which stock is instead monitored at set periods, and replacement stock then ordered. The first is more suited to those with fast moving products, the second geared more towards those with a slower inventory turnover, though in order to successfully forecast and ensure stock is managed efficiently, some sort of review structure must be in place regardless of the stock in question.

In order to guard against any potential forecasting or stock management issues, having an efficient supply chain in place, regardless, is still worth its weight in gold, with demand outliers still able to crop up and cause issues without warning. Some, such as employee strikes, can be somewhat catered against in advance, though others, such as competitor promotions or natural disasters, are harder to manage. As such, being able to effectively move products from A to B regardless of forecasting is still a crucial element to accompany the management of stock and being able to forecast effectively.

No doubt an important element of a distributors job throughout the year, successfully forecasting and managing stock at this time can prove itself increasingly important for retailers given the high demand and stress the festive period brings. Despite the projected slowing of growth for Black Friday in particular over the next few years, there is still a need to get it right, and further prove our worth to retailers beyond simple logistics at this all-important time of year.

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ben@raniericoms.com'

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