Order less, more often - the simple art of stock forecasting (part 2)

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This edition was written by Andy Eastes, Chief Strategy Officer at Linnworks.

In our previous newsletter, we dived into the world of minimizing inventory errors, with a special focus on handling additional seasonal staff. We hope you found those insights helpful.?

But there’s more to the story, because stock forecasting isn’t just science. It's also an art. Today, in part 2 of our series, we'll explore the magic behind hitting the sweet spot on inventory turnover rates, the challenge of minimum order quantities (MOQs), the role of technology and some easy tweaks that can make a big impact.??

The magic number: turnover rates

Inventory turnover rates, also referred to as stock turnover, represent how quickly inventory cycles through your business over a specific period. In simpler terms, it's the measure of how efficiently you're managing your stock. The higher your turnover rate, the better it is for your business.

Here’s another way to look at it. I often find it helps to imagine your inventory like a treadmill. The faster it moves, the more calories (or costs) you burn! How? Because effective turn rate management leads to improved cash flow and the increased ability to outsmart vendor terms:

• Faster sales - When your products move off the shelves quickly, you're not just earning revenue. You’re also freeing up capital that would otherwise be tied up in unsold goods.
• Lower holding costs - As you increase inventory turnover and reduce the time products spend in storage, holding costs encompassing warehousing, insurance, and depreciation are all reduced.
• Making the most of net payment terms – If you can sell inventory before your net30, net60, or net90 invoices are due, you're essentially using supplier money rather than your own to fund business operations. Working smarter, not harder level: ninja!?

Navigating the maze of minimum order quantities (MOQs)

Your minimum order quantity is the minimum number of units you have to purchase from a supplier in a single order. For midmarket retailers, this can often feel like a real-world game of Tetris. Ever felt like you're racing against time, trying to fit orders just right without overcommitting or running the risk of stockouts? That's MOQs for you!?

It can be a tricky balancing act. But fret not. We’re on hand to help guide you through it. Here’s a few tips to help you become a bonafide MOQ maestro:

• Negotiate like a pro – If you never ask, you’ll never know. So, don’t be shy to try your hand at some advanced-level negotiation. Clear communication and compromise can go a long way, and many suppliers are willing to adjust MOQs.?
• Build strong vendor relationships - A good rapport coupled with a history of successful orders makes it much more likely that vendors will work with you on MOQs - and a range of other terms, too!?
• Crunch those numbers – Exactly how do you hit on that perfect MOQ? With a bunch of background work (AKA stats and analytics) to better understand your product demand and forecast more accurately to perfectly align order quantities with customer needs.

Turning up the intelligence on inventory turns

Gone are the days when inventory management relied on the old 'gut feeling' method. That’s as outdated as dial-up internet. And the mistakes that result from it? More common than spilled coffee in a Monday morning meeting!?

Given the complexities for sellers with stock spread across multiple warehouses, their own, 3PLs, FBA, WFS, etc., increased inventory visibility is no longer a luxury. It's a necessity. But you don’t just need a bird’s eye view of total inventory across all locations. You need to be able to dissect inventory data by region, marketplace, and warehouse.?

Granularity is crucial for making informed purchasing decisions and determining where to send what quantities of products. That’s where inventory management systems (IMS) come in. They’re a retailer's best friend in the modern inventory turn saga. Why? Because numbers might not lie. But interpreting them? That's where the magic happens! Advanced IMSs are powerful allies, providing multiple tools and reporting features that act as a skeleton key to unlock the secrets of optimized inventory turns for good.??

Little tweaks, big impact

The golden rule of better inventory turn management? Never underestimate the power of small changes.?

You’ve probably heard an anecdotal story or two about that, like how changing the coffee brand in an office or adjusting the thermostat by just half a degree led to a productivity spike. And let’s not forget how American Airlines famously saved $40,000 by removing just one olive from each passenger’s plate.?

That just goes to show how even the tiniest changes can result in significant ripple effects throughout your inventory management processes. So, regular reviews and adjustments should be at the heart of your stock forecasting strategy.

If that's something you need help with, our Connected CommerceOps solution has powerful stock forecasting and replenishment capabilities designed to make your life easier. Imagine a warehouse where overstocking and stockouts didn't exist? No need to imagine when you have Linnworks. You can see our stock forecasting dashboard in action below.

Wrapping it up: the zen of stock forecasting

In the symphony of inventory management, each player has a unique role:

• Turn rates set the tempo for your operations.
• MOQs are responsible for harmonization, ensuring your inventory balances cost-efficiency and with consumer demand.
• IMS technology is your skilled conductor, synchronizing optimization efforts with tools that consolidate data, analyze trends, and optimize your stock forecasting strategy.?

But to truly achieve inventory nirvana, it’s essential to understand that IMS tech isn’t a ‘set and forget’ fix for achieving perfection. It’s more about embracing nuances and working toward continuous improvement and adaptation.?

It’s a dynamic process that reflects the ever-evolving nature of your business.

An art where you hold the brush, and the canvas is your company's future.?

So… Go have some fun with it! After all, stock forecasting isn’t only an art. It’s a lifestyle. And like any good lifestyle change, it’s all about consistency, patience, and a good old dash of flair!

Until Next Time...

In the next edition, we'll be tackling that age-old quandary: "How much inventory do I actually have?". Yup, we've all been there. And as usual, I'll be dishing out a bunch of top tips to help keep your stock levels shipshape.

Until then, keep those turn rates speedy, your MOQ haggles top-notch, and your tech solutions super-smart. ??