In the last few years, many small FMCG businesses have been forced to stockpile products in order to fulfil orders amid supply chain shocks.
First, a lack of clarity over post-Brexit trade agreements led many brands and retailers to hire additional warehousing space.
Then came COVID-19, and a rush on many essential grocery items that depleted those supplies and created further supply chain chaos as major ports closed and factories faced significantly reduced workforces.
Now – the ongoing war in Ukraine, the increasing impact of climate change and inflationary pressures are all contributing to continued disruption.
Amid this tough economic climate, many small businesses are desperate to free up cash currently locked up in those same stockpiled products – making now the ideal time to look at how accurate forecasting can help.
Better forecasting = a more efficient business model
It is a simple equation: better, more accurate forecasting means better purchasing decisions.
A track record of better purchasing decisions builds up a brands’ confidence in their ability to accurately predict demand and keep customers happy without the need for surplus stock as a buffer.
On the flipside, poor forecasting can bloat this same inventory further, by failing to predict demand, shorting customers and dampening a brands’ confidence in their capacity to manage without stockpiles.
Simple as it might be though, that does not mean it is easy. The reality is that integrating accurate forecasting metrics can be a major challenge for small businesses. This can be due to:
A lack of internal experience.
No long-term sales history on which to base forecasting algorithms.
Data skewed by recent events, such as COVID.
Significant changes in retail listings from one year to the next.
Simple steps to integrate accurate forecasting and ditch the stockpiles
The obstacles that food and drink businesses face in putting their faith in forecasting tools rather than stockpiled products are valid. But with the economic outlook set to be challenging for some months to come, it is a leap of faith they will need to take if they are to free up some much-needed cash for their business.
Here are a few steps to take in order to create a more accurate forecasting model:
Lean on retailers as much as possible
It is firmly in the interests of buying teams to ensure the small brands they list can accurately fulfil orders, so speak to your contacts about sharing as much detailed sales data as they can. Ensure this provides an annual overview to spot peaks and troughs through the seasons.
Take a collaborative approach
If you lack internal expertise then get as many eyes as possible on forecasting documents. Yes, initial predictions are likely to come from a sales team but make sure those in operations scrutinise every number and challenge where they think there is doubt.
Speak to industry peers
Leverage industry contacts to get advice, swap experiences and build up a variety of perspectives on how to build up an accurate forecasting model in a way tailored to the size and scope of your business.
Brands in this space are always likely going to err on the side of caution and maintain a slightly swollen stock position, but accurate forecasting and planning will be critical in order to get back to their ‘business as usual’ position.
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