Here’s a question that’s troubling many business owners: How do you predict how much inventory to keep in stock when demand is so inconsistent? The good news is there are at least three solutions to this problem:
In today’s market, companies seem to think they have to customize products to meet everyone’s taste, no matter how obscure. But this can lead to having a huge number of product types that you have to keep in stock. Instead of having products that can be customized hundreds of ways, consider simplifying your options.
Find out which products and features are the top sellers and which are the lowest sellers. Then calculate the costs and benefits of continuing to produces the low-selling products. Changing your product lineup from hundreds to dozens can save your company a lot of money and only cost you a few customers. Maybe those customers will wind up using different features anyway.
Have a Fast Supply Chain
Supply chain management can make or break your company. If you’re having trouble making an educated guess about how many products you’re going to sell in a certain period of time, you better make sure your suppliers are ready to fill your orders on a moment’s notice. What’s the plan if demand unexpectedly picks up? If you don’t have the products your customers are looking for, you risk missing out on sales.
Mix Data and Experience
Don’t just blindly trust the numbers your inventory management system generates. Compare those numbers to what you expect to happen and see which prediction turns out to be more accurate. It often takes a balanced approach of using creativity and hard data to successfully manage your inventory. For example, if you know that sales usually spike around a holiday but your inventory system estimates a lower number than you thought, you might want to split the difference so you don’t wind up with way too many or too few products. If you’re off by a few you can compensate the next time around.
Even if it seems impossible to keep up with demand, you can come up with creative solutions by limiting your product lineup, keeping your supply chain strong, and finding a balance between experience and data.
Just out of curiosity, are you advocating a Just-In-Time delivery model, or just improving the supplier’s delivery times?
Excellent question. Thank you for asking. I wasn’t very clear about that in the post, so I’m glad I can clarify here. When consumer demand is fairly predictable, I would definitely recommend a Just-In-Time delivery model because companies can save on inventory expenses that way.
However, when demand becomes sporadic and difficult to predict, then I think businesses need to be a little more cautious. They might want to recalculate and increase their safety stock, try to get priority status from key suppliers, build new relationships with local suppliers, and do other things to both cut delivery times and give them a little more security when things don’t turn out as they expect.
I hope that explains it a bit better. Thanks again!
JIT is the most modern concept in management so to know about it one should study about management.