What Is Inventory Forecasting

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INVENTORY FORECASTING
For small business (Wholesalers, Distributors,
eCommerce Sellers)
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You must surely know the story of Goldilocks and
the Three Bears?
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Wait
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What has this got to do with inventory
forecasting?
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The Goldilocks Principle of having something that
is not too hot and not too cold has been used for
everything from the search for habitable
Earth-like planets to inventory management, and
of course, the perfect porridge temperature
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Check that your inventory turnover is within
industry benchmarks
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Use the popular Reorder Point formula to get a
reliable reorder point for your goods
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Are You Selling Goods As Fast As They Are Stocked?
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What exactly is INVENTORY TURNOVER?
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Simply put, inventory turnover is how fast you
sell your inventory and the need to replenish it
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Sales  Inventory
Measured over a period of one year
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Higher Isnt Necessarily Better
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A high number means that youre not stocking
enough quantity of an item
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To fix this, you need to raise your inventory
levels and lower your turnover so that you dont
miss out on any sales
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How Do I Determine My Optimal Reorder Point?
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A reorder point is the level of inventory that
triggers an action to replenish stock
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A popular reorder point formula is as follows
Reorder Point Lead Time Demand Safety Stock
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What Is Lead Time Demand?
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Expressed as a formula
Lead Time Demand Lead Time x Average Daily Sales
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Lead time is the time it takes from the issue of
a purchase order to your supplier to the time it
arrives in your warehouse
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What Is Safety Stock?
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Safety stock is not the stuff that you purchase
in the event of a cataclastic disaster
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Use this simple one that should suit most small
and medium-sized businesses
Safety Stock 1.65 x Square Root of Lead Time
Demand
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Lets Summarise All This
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Hence lead time demand  8 x 30 240 teddy bears
Lead time. It takes 30 days to receive a new
batch of limited edition teddy bears from the
factory
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Average daily sales. You sell an average of 8
teddy bears a day at your store.
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Hence, your reorder point would be 240 10 250
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Safety stock. They come in a compact, stackable
box. So you like to keep 10 teddy bears as a
buffer in your secret storeroom
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Finally, use an intelligent, cloud-based
inventory management system liked EMERGE App
Average daily sales
Lead time for purchases
Inventory levels for your products
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READ MORE
https//emergeapp.net/inventory-reports/inventory-
forecasting/