Predicting the Future: Why Inventory Forecasting Is Essential for a True Partnership with Your Warehouse
“If you have to forecast, forecast often.” – Edgar R. Fiedler, Economist. Perhaps out of all the relationships in the outsourced supply chain, the relationship you have with your warehouse is the most essential. Without a successful relationship with your warehouse, your supply chain could face delays during the most important stage: reaching the consumer. While your partnership with your warehouse will likely be complex and nuanced, it does not need to be frustrating. The key to a successful relationship is inventory forecasting, especially for the following three criteria:
Inventory Levels– What is your average monthly inventory? What is your inventory turnover ratio? Does your business have any seasonal peaks? Are there particular holidays when sales of your product increase? How many SKUs (Stock Keeping Units) do you plan on storing? If you are utilizing a public warehouse, the answers to questions like these will guide your provider in allocating storage space. If you underestimate the space that you require, you might be told there’s no available space for your products. If you overestimate, you may be charged for a minimum storage fee that covers the space you aren’t using. All this could lead to rate increases down the line. It’s best to analyze inventory data from prior years and use that information to predict inventory peaks for the upcoming year. However, possible future anomalies must also be communicated with your warehouse, as there are some factors that your warehouse won’t be able to predict by looking at your previous inventory levels. Is there an upcoming marketing promotion that you expect will boost sales? Is there a new retailer that you’ll be developing new SKUs for? Details such as these should all be communicated with your warehouse well ahead of any inventory arriving.
Inbound Volume and Complexity – Will your inbound shipments arrive steadily throughout the month or will they all arrive within a few days of each other? What percentage of your inbounds are palletized vs. slip-sheeted or floor-loaded? Inbound information is essential to a warehousing provider developing a plan for supporting your business. Some public warehousing companies may have multiple facilities and may assign your account to a particular location based on the information you provide. Smaller warehouses may have less dock doors and dock space, so if your floor-loaded inbounds frequently arrive back-to-back, a larger facility may be a better fit for you. Some warehouses operate on a schedule and may not be able to handle a sudden influx of inbounds. Certain facilities may not have the equipment to handle slip-sheeted loads, which will obviously be a major issue if a slip-sheeted load shows up unexpectedly. These are all factors to consider when discussing your business with your prospective warehousing provider.
Order Volume and Complexity – Perhaps the most difficult to forecast, order volume and complexity can vary greatly from week to week, especially for newer companies. The order fulfillment process can be very labor intensive for the warehouse, so it’s typically the most important activity for the warehouse to have a solid forecast for. A warehouse needs to be able to anticipate staffing levels and increasing staffing levels takes time and resources. How many orders do you receive in a month and what is the average order size? What percentage of your orders are full pallet vs. loose case pick? How many SKUs are in a typical order? Do you have any parcel orders with short lead-times? Do you require any value-added services, such as shipper builds or re-packs? Consider the length of time that it takes to fulfill an order of one pallet vs. a case pick order with multiple SKUs. Also, consider that if you have a high SKU count and most of your orders are loose case pick, the warehouse will have to set up the pick-line to efficiently fulfill these orders.
At Tyler Distribution, we understand that the warehouse is an integral part of your business, that’s why we ask detailed questions upfront to get a solid grasp of your business. We know that without an efficient warehouse, your product may not reach shelves on time, opening the opportunity for consumers to move on to competitors’ products. If your currently facing problems stemming from an inefficient warehousing strategy, contact us immediately to discuss your options.