One of the worst things that can happen in any warehouse is when an order cannot be processed because it is not available in the inventory. Consequently, it becomes a backorder, delaying the entire process and dissatisfying the consumer. Backorders generally occur when warehouse managers have failed to order enough inventory supplies. This could be because the demand for the product was higher than anticipated for a specific season. Consistently facing backorders is bad for business as it could negatively affect your brand and your relationship with your past or existing consumers. One way to prevent this is through the adoption of predictive analytics. This article will consider how backorders can be prevented and how inventory levels can be optimised with predictive analytics.
What Does Inventory Optimisation Mean?
Inventory optimisation is a typical goal of any business, let alone a warehouse operator’s dream, to ensure their inventory is organised and maintained. Organisations consider this a vital aspect of their business because not only would it help them to meet the demand for a specific product and accumulate a higher number of sales, but it also keeps logistics costs to a minimum. Inventory optimisation is also essential to eliminate issues such as stockouts and overstock in addition to backorders.
To ensure inventory optimisation is effective, one needs to be fully aware of their inventory in the first place. This requires companies to consider the feasibility of adopting a system which can update the database whenever one item from the inventory leaves the warehouse. Hence, inventory feasibility comes down to accuracy and effectiveness. Warehouse managers need to consider solutions which allow them to complete transactions and deliveries without prolonging time whilst guaranteeing a high level of accuracy when managing the inventory. A promising solution in this respect is digitalisation. This does not mean that warehouses must be transformed into digital factories but rather invest in a digital tool to optimise inventory rather than employing more labourers to keep track of inventory stock.
What Is Predictive Analytics ?
One mandatory technology that vastly helps inventory managers is predictive analytics. It uses the company and industry knowledge in the form of historical and current data to identify patterns and extract insights. In other words, it is a way of examining data to answer questions, which can help a business to strategise and make smart decisions that drive its business goals. As these insights are drawn from data, they are known to be reliable. While it is important to note that various types of information data analysis can provide, including descriptive, diagnostic and prescriptive, predictive refers to futuristic insights. This means predictive analytics forewarns you of future aspects that may impact you. Aspects related to potential consumer trends, market trends and evolving industry standards are some insights that would be gained through predictive analytics. How futuristic such insights may be may differ according to what you need to know. Hence, whether it is information valid for the next month, year, or a couple of years ahead, you can consider multiple futuristic factors.
How Does Predictive Analytics Help with Inventory Optimisation and Preventing Backorders
There are several things a company needs to consider when looking at ways to adopt inventory invention. Here are a few ways to integrate predictive analytics to help prevent backorders and optimise your inventory operations.
Does Demand for Products Vary by Season?
Every month and year have different trends. As consumers are fast to hop on the latest thing in the market, the demand for certain products may grow in one moment only to fluctuate the next. Ensuring you keep track of such behaviours would mean you do not waste finances or resources on products that may not have much demand in the long term. Additionally, some products could have seasonal demand. For example, Christmas is the only time there would be an influx of orders for various types of Christmas tree types. While the latter may be obvious, the former is hard to keep track of. However, with the help of predictive analytics, consumer trends can be detected and informed in advance. Inventory managers can consider such information when placing bulk orders for the respective month.
Forecasting Future Cash Flow
Inventory directly relates to the potential number of sales you will generate. Hence, another way predictive analytics can be useful is to forecast future cash flow. This would help businesses assess whether they have gained a profit, for instance, or reached a financial goal for the year. Knowledge of this would not only help organisations boost morale within the company to motivate employees to keep working harder, but it would also help the company consider in advance how the sums can be allocated. For example, a portion of the finances is used to purchase other goods to restock inventory. Hence, making intelligent investments based on which goods are forecasted to give a good cash floor on average would help warehouses to specialise and identify which type of products their brand is known for.
Automate Replenishment
Replenishment refers to the restocking process. Traditionally, upon being notified that items in the inventory were running out, the warehouse manager had to call and place the order. Imagine a fast-paced warehouse with too many retail orders being processed. Additionally, the burden of following up with the respective seller and ensuring the goods are made on time can make this entire process quite stressful. With data analytics, however, you can automate this process. As data analytics estimates when your items are over or when they will run out, the system will automatically calculate a reasonable period for the goods to be delivered. Instead of someone having to make calculations based on various risk factors to ensure the goods arrive on time, the system will consider every possible thing that could go wrong and order the goods so that they will arrive on time.
Increase Supply Chain Transparency
Predictive analytics helps to increase visibility and transparency in supply chains. In addition to tracking items, visibility is increased with the holding of data analytics by making correct delivery time estimations. Whenever a person places an order, it is common practice to see when it is reasonable to expect the package to be delivered. Many people would rely on this and place their orders. Hence, where it is not delivered as promised, it could lead to angry consumers who may even demand a refund by returning or cancelling the order. Accordingly, ensuring the package specifies an accurate duration is an important. Data analytics, in this respect, considers the shortest route available for transporting goods. Hence, offering a reasonable estimation and further helping drivers find the most effective route guarantees the product is safely delivered.
Stay Notified on Product Lifecycles
While being informed when inventory is running out is advantageous, it is essential to remember that some inventory is perishable. In other words, they would have an expiration date. Having to throw out inventory for such reasons is a huge waste for warehouses. Hence, awareness of which items are perishable and ensuring they are sold as soon as possible is essential. Data analytics can help companies to find the right audience to sell such items. The information provided can therefore be used for marketing efforts to ensure that whatever stock remains are sold on time. This also demonstrates that data analytics used in the warehouse is not limited to inventory. It helps much further in the supply chain and other stages of e-commerce. As a result, when one invests in predictive analytics, they improve their overall processors in every way posisble.
Be Prepared For Anything with the Help of Predictive Analytics
Predictive analytics can essentially help you prepare for anything. Take preventive measures to eliminate situations that can take you by surprise and have more control of your warehouse operations. With a compact warehouse or inventory management solution, streamline and automate your overall processes, improving your reputation and increasing customer satisfaction. Ensure you are never running out of stock or not stuck with too much of leftover stock by taking advantage of the digital solution tools to help you completely take charge of such a situation.
