Forecasting and Inventory Management

Forecasting and Inventory Management

Forecasting plays a vital role in determining the level of production and the number of items needed to meet market demands. In the most efficient and established supply chain organizations, forecasting acts as a yardstick for determining the items sold based on the existing demands of such said products. In inventory management, forecasting helps in the optimization of the levels of the inventory (Kurawarwala & Matsuo, 1996). Through the forecasts, vital information is provided that enables the people tasked with the management of the resources in the organization to make deliberate choices based on the current market demands and forecasts. Forecasting also allows the logistics and distribution managers to balance inventories across the existing networks and subsequently negotiate favorable terms that suit the company (Kurawarwala & Matsuo, 1996). On the same note, forecasting is essential in reducing inventory stock-outs based on exercising informed purchases based on the current demands as the organization would be empowered to make purchases that correspond to the existing demand (Kurawarwala & Matsuo, 1996). Subsequently, it positively enhances customer satisfaction. Thus, through forecasting, such initiatives could be conducted without a lengthy decision-making process.

How Reductions in lead time can Provide Opportunities to Reduce Inventory

Longer lead times shows that an organization would be compelled to engage in increased inventory stock as well as increased difficulty in introducing new products in the market. It also signifies the problem in responding to the always dynamic market changes. In inventory management, reducing lead time has benefits that revolve around reducing costs, improving productivity, and streamlining operations (Das, 1975). However, it also carries several opportunities. First, it offers mechanisms for quicker replenishment of stock to curb instances of lost sales, lost customers, and stock-outs. Again, it will give the inventory the flexibility to conduct urgent turns as per the market demands as well as enhanced order fulfilments through the aspect of order flows that come with it (Das, 1975). Such processes could be effectively conducted without interference with customer service levels.

Technology in Enhancing Inventory Management

Technology plays an instrumental role in the management of the inventory in various ways. Generally, the integration of technology in supply chain management enhances inventories. In this regard, it improves the organization’s stock management as it helps the organization to accurately ascertain the amount of inventory that is needed (Manthou & Vlachopoulou, 2001). Consequently, it would help the organization in avoiding shortages that could be detrimental to businesses. On the same note, inventory control technology immensely contributes to the management of time and money. The technique chosen will ensure that it is up to date with the changes in the supply chain, saving the organization money and time that could have been spent if the technology were not in place (Manthou & Vlachopoulou, 2001). Again, through inventory management technology, an organization could enhance its productivity and efficiency as well as in the elimination of errors and other unforeseen risks (Manthou & Vlachopoulou, 2001). The technology would prove vital in forecasting and aligning operations based on the existing demands.

Vendor-managed inventory in effective control of Inventory Costs

The primary goal of the vendor-managed stock is to significantly reduce the costs by focusing on small bits of items as opposed to the traditional focus that shifted on the customers and neglecting the essential tenets that are aimed at reducing unwanted costs. In reducing the inventory costs, the vendor-managed inventory often embarks on several initiatives. First, it gives the vendors control over the supply chain, an aspect that could be exploited by the vendors to eliminate wastages through eradicating non-value adding practices and other costs that are unwarranted (Dong & Xu, 2002). On the same note, precise planning eliminates extra costs that could have been incurred in storing excess inventory. Such an act also reduces obsolete stock that rakes costs as they occupy spaces (Dong & Xu, 2002). Finally, the approach could be efficient in reducing the costs that are incurred through high delivery costs as well as eliminating the inventory shortages.