If you don’t know what you’re going to sell tomorrow, how can you plan today?
Many businesses suggest that 'we don’t forecast!'
You may believe that you are not forecasting but any of the following are a forecast that you have to compute manually for every item:
• An average of the last 3 months sales
• Manually calculated and entered min/max levels
• Using gut feel
A forecasting engine will look at historical sales for every single item and produce a forecast (typically 12 months into the future), picking up trends, seasonality and intermittent demand. The great news is that the Inventory Adviser generates forecasts using 15 different algorithms, then selects the forecast that most closely matches the demand pattern.
While we do want the forecast engine to do most of the work, there will be a small percentage of items that need manual intervention.
• Review the top 5-10 items on the forecast page where historically we have sold more than, or less than, the forecast and agree on (and make) manual forecast adjustments.
• Factor in any new or lost customers, by adjusting the forecast up or down on affected items.
• Review overall sales to forecast using the graphical display on the forecast page, making global forecast adjustments in the event that the growth is too extreme or too conservative. Remember that you can use the filter to hone in on key product groups/ranges and make adjustments at this level.
• Finally, go to the list of “new items” on the dashboard and capture manual forecasts for these items.
The more appropriate the forecast, the more accurate our purchasing and planning will be – and the better shape our inventory will be in.
Action: Take a look at the forecast tab for a location and look at the sales versus forecast graphics. Take a look at the top 5 lists displayed there and see if you can understand why these items are in the list.
The one thing I can tell you about your forecast is that it is wrong – perfect forecasting does not exist, whatever method you use. With that in mind, it’s crucial that you monitor your forecasts, so that you can fix the worst ones before they result in stock-outs or excess inventory.
The Inventory Analyser from MYOB Advanced gives you prompts to assist with monitoring your forecasts:
• Dashboard exception lists measuring month-to-date sales versus forecast help you find items where you are selling much more than the forecast or much less than the forecast. Review these forecasts and make manual adjustments, where appropriate, for the best inventory outcome.
• Use the classification of the item to hone in on the most important items to fix. Remember that we will be ordering based on these forecasts, so fixing the forecast sooner rather than later will prevent bad (or no) orders from going out to your suppliers.
Action: Take a look at the dashboard exception lists titled “Forecast exceeds sales” and “Sales exceeds forecast”, selecting a few items to see if you understand why the item is on the list.
If you want more information on the Inventory Forecast Module for MYOB Advanced – please call us!
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