Finale inventory demand projecting software#

If you place an order and end up with excess stock taking up valuable warehouse space, then you reordered too early.

If you don’t have enough stock on hand to cover your reorder lead time, you’re reordering too late.

Reordering inventory is both an art and a balancing act. In other words, it’s a minimum quantity of an item held, such that, when a stock falls to this level, the item must be reordered. How Do I Determine My Optimal Reorder Point?Ī reorder point is the level of inventory that triggers an action to replenish stock. This means that you get the new stock in before you sell it, thus minimizing the quantity that you need to hold and all the risks associated with holding stock. Why? Because it matches the reordering and restocking time of an item within the sales cycle. Not an ideal situation!įor most businesses, a turnover of 2 to 4 is ideal. Here, you are selling an average of 1 item a month. To fix this, you need to raise your inventory levels and lower your turnover so that you don’t miss out on any sales.Ĭonversely, you are clearly overstocked if you have a turnover of 1 and you have a quantity of 12 items in stock. If it takes 3 weeks to replenish that stock, then you will miss about 3 sales during that period since you are selling an average of 1 item a week. This means that you turn over your inventory 4 times over a period of one year.Ĭontrary to thought, a higher inventory turnover number isn’t necessarily better.Ī high number means that you’re not stocking enough quantity of an item.įor example, if you turnover an item 48 times a year, then you are selling 4 items a month. The faster you “turn” your inventory, the more inventory you’ll need in a year.Ī basic, oft-used formula is Sales ÷ Inventory measured over a period of one year.įor example, if your annual sales were $200,000 and you had $50,000 worth of inventory, then your inventory turnover ratio would be 4. Simply put, inventory turnover is how fast you sell your inventory and the need to replenish it.

Inventory turnover is arguably the single most important business indicator for a wholesaler or distributor.Īnd it is critical for inventory forecasting. In fact, I’ll share with you a two-step process to forecast your inventory levels accurately: first, check that your inventory turnover is within industry benchmarks and secondly, use the popular Reorder Point formula to get a reliable to reorder point for your goods.Īre You Selling Goods As Fast As They Are Stocked?įor a small to medium-sized business owner, you should know your inventory turnover ratio very well.

Finale inventory demand projecting software#

Nor does it require expensive or complicated statistical software for demand forecasting. I’ll show you that inventory forecasting is not some dark art that is mastered by a few consultants. So, for the majority of small and medium businesses, inventory forecasting is simply an inventory reordering strategy to ensure that your stock levels are in the Goldilocks zone. In the context of inventory management, the Goldilocks zone means holding just the right amount of stock in your business so that you’re not so overstocked to cause holding costs and risks to rise and not holding too little stock so as to miss out on potential sales due to stock-outs and waiting for new stocks to arrive. 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. You must surely know the story of Goldilocks and the Three Bears? Wait, what has this got to do with inventory forecasting?