The principles of supply and demand are fundamental to any retail business, and successful retailers have a firm grasp on how these trends affect their bottom line. To prepare for potential shifts in consumer demand, retailers must understand their supply and how to adjust it to meet changes in consumer shopping habits. This process, known as inventory forecasting, can make all the difference if retailers implement it successfully.
The pandemic has wreaked havoc on several industries, but the retail industry is one that has been hit the hardest. While online shopping has been on the rise for the better part of two decades, the pandemic brought massive growth in e-commerce as consumers decided to shop from the comfort — and safety — of their own homes. As such, retailers must now find ways to optimize their inventories to keep pace with the digital retailers who have begun to take a firmer hold over consumer markets.
“To successfully manage their inventory, a retailer must be able to plan for demand,” says Anil Varghese, CEO of retail solutions provider Proxima360. “Without adequate planning for demand, you could be left without enough inventory to fulfill customers’ orders, or massive amounts of product that you can’t sell.” According to Varghese, retailers must find the balance between fulfilling consumer demand and being prepared for unexpected needs while taking care not to overstock their stores.
The costs of inadequately planning for changes in customer demand can build up significantly. On one hand, if retailers don’t have enough inventory and can’t fulfill customer orders, potential sales could be lost. On the other hand, if retailers have excesses of a certain product that isn’t selling as well as initially expected, they end up wasting money on the costs of storing that product — a cost higher than they would make from selling it.
Economic Order Quantity and Accurate Forecasting
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