How the pandemic affected the behavior of consumers around the world ? Covid 19 impacted different consumer groups in different ways, resulting in varied responses towards the crisis. In the wake of the pandemic, there was a re-categorization of products. Certain products that were earlier not considered as essentials have now been included in that category.
The normal consumer behavior pattern changed. The value- driven approach has led the customers to try different products and shopping patterns. Convenience, availability and value became the top drivers for a consumer’s decision.
In such scenarios, how do you predict consumer behavior? How can one avoid overstocking or understocking of goods? How can one ensure over or under the production of goods? Enter inventory forecasting and scenario planning. Inventory forecasting involves the calculation of the required inventory to meet the customer demand at hand based on historic data. Inventory forecasting benefits us by:
1. Less inventory required
With inventory forecasting, the goods will be able in the right place at the right time rather than lying idle in the storage houses. Having data- driven predictions will help in purchasing the right amount of inventory.
2. Availability of goods
Having the right amount of inventory available reduces the chances of stockouts or back orders- the orders can be completed as soon as they are received and get delivered to the customers on time. Also, this practice helps in building the customer’s trust in the brand as they can find what they need & when they need it.
3. Less manual labor
Accurate inventory forecasting can save labor and storage costs because you can better respond to changes in demand and reduce some manual labor. Inventory forecasting tools help to automate ordering, forecast labor requirements, and consider changes in order volume, making it easier to understand what is about to happen and reduce inventory holding costs. This saves time and manpower for warehouse management and all employees.
4. Efficient production cycle
Inventory forecasting can help you better manage products throughout the retail supply chain. When you understand the manufacturer’s lead time, the warehouse receipt schedule, and the exact level of inventory for each product required to place a new purchase order, you can work with suppliers more effectively and better understand the production cycle.
This way, it is not a guessing game, and it is not a question of asking for more stock when you feel like you are running out of stock. You can make informed decisions without rushing production planning and shipping.
Scenario planning helps decision makers determine the scope of potential outcomes and impacts, assess responses, and manage the possibility of positive and negative outcomes.
By visualizing potential risks and opportunities, companies can become proactive instead of just responding to events.
Scenario planning can provide a competitive advantage by allowing the leader to respond quickly and definitively, because it has been believed that the situation has been documented, the righteousness of the crisis does no need to revolve.
Also results in planning, budget, prediction and prediction and prediction and painting for business growth, preaching, budget and prediction and prediction, resulting in functional determination of non-capacity and the future events of the Plan for the Stage Scenario.
To provide the potential impact of the scenario must include the effects of several and events that help executives. Finance, work and other teams can prepare the first response. Some elements of knowledge management. By participating as the main representative, the company captures its ideas and recommendations. If these stakeholders are not available during the real extreme event, we have a document to go back to. The benefits of inventory projection are as follows:
Lead time reduction
Effective inventory forecasting has a positive knock-on effect on the entire organization. Purchasing managers can better control the planning and procurement of raw materials. Supply chain managers can better understand inventory flows and can proactively take mitigation measures against low inventory and excess inventory forecasts. Distribution managers can forecast regional supply and demand and fine-tune their distribution resource planning. All these proactive activities throughout the supply chain can shorten the delivery time to the end customer.
Improvement in manufacturing efficiency
Manufacturing managers and production planning teams can work closely and objectively with supply chain and demand planning teams. Based on reliable inventory forecast data, sound decisions can be made in time to improve production cycle operations. By having a better understanding of expected downstream inventory movements and supply and demand forecasts, time-consuming conversions and low-volume production can be avoided. Improving manufacturing efficiency helps reduce manufacturing costs and lead times, thereby improving customer service levels.
Reduction in inventory costs
In typical business scenarios: raw materials, packaging materials, work in progress, sub-components, semi-finished products and finished products represent 65% to 70% of the total cost of sales (COGS). Unreliable and erroneous forecasts can cause a bullwhip effect throughout the supply chain, leading to unnecessary buffers at multiple decision points such as purchasing, stores, production, and distribution. The effective inventory forecast driven by the system can reduce the safety stock level and reserve inventory level of the entire supply chain. Adopting new forecasting and scenario planning methods aids businesses in meeting the dynamic customer demand an improving brand loyalty.