If you read business journals, you’ll have read about companies that have fallen victim to the Amazon effect, as a result of which they are collectively losing billions of dollars. Inefficient inventory controls that negatively impact inventory planning and forecasting are responsible for some of this loss. It’s no secret that traditional forecasting methods are not an accurate way to plan inventory, because they’re imprecise and at times wildly inaccurate when it comes to predicting customer behavior in a technologically-driven world. Today, companies need to take a new approach to inventory practices.
Best Practices in Inventory Management
Today’s best practices in inventory management require a better understanding of customer behavior. You need to know what factors influence their purchases and you need to proactively plan, but also have the ability to respond rapidly to changing demand.
Instead of relying on statistical forecasting models, inventory planning should focus on today’s market challenges that are more relational and causal based and can change month-to-month. This is why in the digital age, companies need to adopt new ways to determine customer demand, such as demand segmentation.
What is Demand Segmentation?
Demand segmentation is the process of creating groups of different types of demand based on commonalities of customer purchases. These segments could include loyalty program, promotional, seasonal or social demands. Classifying customer transactions by their influencing factors can give you a better picture of what is influencing the demand for your product(s) so that you aren’t caught short-handed or with overstock. Big data makes this level of segmentation possible and more manageable than ever before.
American Western Distribution’s web-based inventory control system provides fulfillment services customers with 24/7, up-to-date access to their inventory levels. AWD helps businesses control their costs by supplying the warehousing and fulfillment services businesses need to meet increases in demand for timely distribution of their products.
