Reducing the need for safety stock with smarter demand forecasting
Traditionally, complex product ranges, multiple sales channels, and external factors like seasonality have made it difficult for businesses to accurately forecast demand without having to constantly update spreadsheets and trawl through volumes of historical data.
With limited forecasting capacity, many businesses fall back on safety stock as a means of mitigating the risk of stock outs and ultimately ensuring customers get their products on time. But with additional stock comes additional inventory holding costs, and that’s an added burden on cash flow most business would prefer to avoid.
The good news is that, today, real-time automated demand forecasting is available to businesses of all sizes thanks to intelligent order management systems. QuickBooks Commerce’s demand forecasting functionality, for example, uses key sales and inventory data to identify patterns and pull out insights about future demand by product, variant, warehouse location, etc.
With these insights, businesses can more confidently plan for the future – and that includes knowing when and where to hold stock without needing as much of a buffer, i.e. safety stock.
Of course, unexpected fluctuations in demand can and do happen, so safety stock will always have merit. But with the advanced forecasting capabilities now offered by smart inventory management systems, it’s possible to maintain lean warehousing practices without the worry of stock outs.