Grab the Bull by Both Horns

By Ray Goodman

Take Control of Your Purchasing, Too

Demand forecasts falling off target? You’re not alone. Industry statistics estimate the average forecast error rate at 35 percent to 40 percent. That means most companies risk buying a significant amount of wrong inventory or rely on drop-ship vendors to respond to unanticipated spikes in demand.

When demand forecasting works, you exercise greater control over purchasing. You have the information you need to purchase the right products, in the right amounts, at the right time, for the right price. Here, direct merchandisers have greater control, gaining the following:

more predictable demand streams;
more accurate inventory levels;
better estimates to drop-ship vendors;
special vendor pricing;
optimized inbound shipping; and
improved customer experience.

Commonly referred to as continuous inventory, accurate demand forecasting allows you to account for the uniqueness of the catalog and Internet channels, while improving internal efficiencies such as generating purchase orders and inventory control. It also makes you more responsive to changes in demand that can save you time and money. —RG

For direct merchandisers, the Internet brings opportunities for additional sales and another touchpoint to build relationships with customers. As Internet-based sales have risen to 50 percent of total sales or more for many companies, they’ve also introduced new challenges to demand forecasting and inventory management. Many traditional catalog merchants feel less in control of their inventory planning than in the past.

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Ray Goodman Author's page Ray has been a consultant to various direct marketing companies across the country. His goal is to streamline the merchandising and marketing planning processes inherent in multichannel marketing. He works closely with clients and industry experts to develop new methodologies and tools for merchandising and inventory control. He says, "It's exciting to work with our staff customers to help evolve our applications. I'm proud of the way our staff works together to bring our visions from concept to product." Ray has been with Direct Tech since 1994. His primary responsibility is directing the development of Direct Tech products. He's been a featured speaker on inventory forecasting and management at various industry conferences.

Inventory Management: Grab the Bull by Both Horns