Accurate inventory forecasting is essential for every supply chain business, especially when customer demand changes rapidly. Mathematical and statistical data analysis is central to this process. To put it in technical terms, inventory forecasting or demand planning refers to the practice of using data on past events and trends to predict inventory amounts needed to meet future demand. When forecasting is accurate, businesses are prepared with enough product to fulfill orders and inventory spending is not too much or too little. Effective inventory forecasting can make all the difference in profitability.
For example, accurate inventory forecasting can provide strategic insights that a company can use to align the levels of inventory with their business goals.
It leads to more reliable data, improved reporting, and ultimately better margins and profitability. Production cycles and supply chains can be handled better with inventory forecasting, since it allows for the automation of other inventory processes. The risk of stockouts is also significantly reduced through inventory forecasting. The bottomline impact of accurate inventory forecasting is clear: ordering is much more precise, stock is maintained at a realistic threshold, and less money is tied up in inventory.