The Importance of Sales Forecasting
By Adina Deutsch, ERS Intern
The difference between success and failure
Now more than ever, sales forecasting is critical for both suppliers and retailers to maintain successful businesses. Staying on top of the consumer’s shopping habits is critical in managing the most important aspects of the retail business- inventory productivity.
POS (EDI 852, portal data or spreadsheets emailed from retailers, etc.) provides quantitative data on what sells, what doesn’t, where the highest demand is, and more. Integrating retail sales and inventory data with geography and demographics provides a more acute view of any trends. This accuracy provides a roadmap to produce and flow the right amount of product at the right time depending on seasonality, trends, and overall consumer demand. By more accurately anticipating demand, risk is reduced on the cost of capital- thus increasing profits and reduce losses, avoiding both overstocks and stock-outs. It is mutually beneficial for both supplier and retailer.
We all know the benefits of accurate forecasting. Some of us may also know the tragedy of inaccurate forecasting- from painful lessons learned in the past. Ordering too much ends up with unwanted inventory- markdowns ensue and so does profit- wasted capital on merchandise that does not sell. Contrarily, not order enough inventory leads to lost opportunities to sell more and increase profits. To prevent either scenario, close to real time and accurate forecasting is required.
Consistent POS data is the key to more accurate forecasting
The best way to ensure precision is to get consumer data from a reliable and consistent source. For suppliers, gathering, scrubbing and integrating POS data from multiple retailers can be a challenge (ERS can help). Retailers provide different levels of information (chain vs. store level, brick & mortar vs. online) and different time frames. Suppliers and distributors may also want to integrate drop ship data as it becomes a greater part of the business. There’s a wide gambit from retailers like Walmart who provides a lot of data and makes getting it easy, to others that only provide aggregate information or lock data behind a dictatorial paywall.
That said, understanding consumer demand is vital to improving inventory turnover rates. Improving the estimation of future sales is the basis to know how much inventory to order to satisfy customer demand and prevent lost sales. Discovering these trends proactively is crucial for maintaining business health and success.
Expertise is just as critical
Forecasting is complex and every company does it differently. Having the right tools can make the job easier but equally important is smart people with experience. Understanding industry best practices and willingness to adjust models is required. At Enhanced Retail Solutions, we understand the complexities between the different retailers and help fill in the gaps of data, software and expertise. It’s a win-win for our clients. We provide clear data insight and a plan of action to get the maximum benefit from POS data. Our consulting is unparalleled- we make it simple by doing the hard parts affordably and efficiently.
Also key to forecasting is having actionable reporting. We provide both consulting and software solutions to deliver custom reports, dashboards, forecasts and tool kits for planners. All enable more fluid predictive analytics that reveal greater results.
To learn more about Enhanced Retail Solutions and how our forecasting can help advance your business, click here.