For many businesses, the peak season is of such critical importance as that is where most of their sales and revenue is being made. It is, therefore, no surprise that more accurate forecasting is so important for a business’ success as these forecasts will reflect predictions about sales, and in turn dictate significant business decisions. To help ensure more accurate predictions for such a vital period, we’ve suggested four useful tips for better forecasting before peak season.
Account for lead times
As customer demand is at its highest point during the year in a business’ peak season, ensuring lead times are well accounted for is a no brainer. However, it is important to note that if you have suppliers in other parts of the world you will need to factor in that lead times will have their own seasonality, such as cultural events like the Chinese New Year and Diwali, that can have economic implications of suppliers. For example, some factories can close up to a month for Chinese New Year.
Monitor economic drivers
Economic drivers represent all the forces that generate opportunities or costs for your business. In order to forecast more accurately, economic drivers need to be taken into account of beyond pure demand, especially for peak season. Take for example, when considering two products with the same expected future demand, the final purchase order decision can be very different if one product is expected to be long-lasting, while the other is perishable – the demand levels might be equal but the respective inventory risks aren’t.
Analyse external factors affecting inventory management
Finally, external factors affecting inventory management that put an increased strain on forecasting before peak season need to be taken into account. These include the nature of the labour market, warehouse space constraints and parcel carrier capacity specifically in peak seasons. Look to historical statistics for external factors affecting inventory management and plan well in advance to mitigate against problems that may arise.
If your business, like many other businesses, rely heavily on revenue from a few months to sustain your business all year, better forecasting is vital for planning and the future success of your business.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.