For any type of business from strictly online ecommerce website to business that uses retail as well as online sales or only retail sales, knowing what to order in the future has always been an intuitive process.
In the past, most ordering managers have taken a rough estimate of what has sold in past years, what the current sales are for a particular item and what the trends in purchases appear to be with consumers.
The problem with this method is the lack of hard data that is used to make these determinations. It has often led to business ordering excessively, inventory that is not going to sell or missing out on sales potentials with items that have traditionally been top sellers.
To address these issues, software companies have designed packages of customized programs for demand forecasting. This software is able to look at past sales, past inventory numbers, past pricing and even the inventory that had to be discounted to sell in order to provide information relevant for current decisions.
Assistance with Operations
While demand forecasting has obvious uses for ordering and inventory purchasing decisions, it can also be used for other business-related tasks as well. By understanding the pattern of sales in the past, it is easier for business managers to advance plan for scheduling of employees or even seasonal hiring.
This can assist in saving any business in the money and time involved in planning schedules, hiring seasonal employees or moving staff within the company to more effectively deal with increasing or decreasing demands.
Cost of Inventory
Knowing when to buy additional inventory that may be offered at lower costs or as a discounted item is also an asset. By understanding when to take advantage of these low purchase prices and when the additional inventory will be a problem for the business to move will help to avoid having working capital tied up in merchandise that may not sell for months.