Don’t Let A Lack of Sales History Limit Stock Level Forecasting On New Products

Stock thumbWhen forecasting future stock level requirements for established products, businesses will be able to look at usage over previous sales periods going back several years and have a good idea of the stock levels required to meet future sales demands. If the business is growing or the item or product range is increasing in popularity then a percentage increase can be added.  However when a new line is introduced that valuable historic information is not available, at least not for the first 12 months. Companies are often left with a best estimate, trying to gauge how many they need to keep in stock based on experience, performance of similar items and gut feeling.

When the new product lines are readily available from suppliers it isn’t too much of a problem, hold a bit in stock, see how it goes and more stock is a phone call away.  However when new products lines are brought in from overseas with long lead times or have long manufacturing timescales, getting this forecasting right becomes essential.  The challenge then becomes not just working out how much to hold in stock but forecasting accurately to ensure the next order with suppliers is correct.  When you have to wait a month or more between ordering and receiving stock, being out with any forecasted stock requirements can result in extended periods of stock outages, failure to get the new line off the ground or too much capital tied up in slow moving stock.

12722 - Forecasting with Constant UsageFlexible Forecasting With OrderWise

With a range of stock forecasting methods available in OrderWise, users have several options available to calculate the minimum or maximum stock levels required. When it comes to forecasting future usage this can already be achieved in conjunction with the Variable Usage forecasting method.  Users specify how many weeks’ worth of stock they wish to hold and OrderWise will look back at the usage of the item for those weeks previously, as well as deciding how many years to look at retrospectively.

This information can then also be used to forecast into the future using the To Purchase Report. Users simply set the forthcoming date as required and OrderWise will look at current stock, current demand, current purchase orders, supplier lead times and future usage requirements, minus any forward orders based on historic usage over the selected period.  This provides a complete picture of expected requirements at the click of a button, informing users what needs to ordered, in what quantity to order and for when the stock is needed. Where long supplier lead times exist, this method of forecasting is nothing short of essential. 

Benefit From More Accurate Forecasting For New Product Lines With New Feature 

In the version 10.1 release, this ability to include forecasted usage in the To Purchase reports has been extended to the Constant usage forecasting method, providing a more accurate, automated and effective method of forecasting requirements for new product lines.

Constant Usage looks back at the usage of an item over a user defined number of weeks and calculates the average usage per week, with users then setting the minimum and maximum number of weeks’ worth of stock to be held. Many businesses find this method of determining stock levels well suited to new product lines because as sales of a new item start to gain momentum, the average usage rises and the minimum and maximum stock level figure is adjusted accordingly, creating a greater representation of requirements than a static figure.

12722 - Forecasting with Constant Usage PO ReportWhat the addition of this new feature achieves is that it enables future requirements to be calculated based on this changing average each time the To Purchase Report is run, with the average recalculated based on any new usage that has occurred.  This can be further enhanced by taking advantage of another feature which has been added in version 10.1 to ignore usage periods of no usage and no stock, which you can read more about HERE.

Once enough usage history has been gathered, possibly after 12 months has elapsed, the forecasting method can then be switched over to Variable usage to take advantage of historical data and gain a much more accurate forecast with expected growth factors then applied as required.

Although this new feature is ideally suited to ensuring stock requirements on new product lines are accurately forecasted, anyone using the Constant usage method can take advantage and start accounting for future requirements when running the To Purchase report for greater supply chain control and demand management.

For more information on OrderWise including Stock Control, download our brochures or watch our videos.

To discuss your requirements in more detail contact us on 01522 704083.

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