Stock Demand Forecasting in Wholesale Trading Companies with ERP System

Imagine this scenario - You are running a wholesale trading business that supplies products with a wide range of variants to customers across Malaysia. In such a highly competitive market in Malaysia, the key to success lies in having efficient inventory management techniques.

You need to be prepared for seasonal fluctuations, potential returns, and timely replenishment of your stock. And, this is where demand forecasting comes into play.

In this blog, we will take a closer look at stock demand forecasting - what it is, why it is important in trading companies, how the ERP system helps, and more.

So, let’s get started!

What Is Demand Forecasting with ERP System?

In the world of trading companies, demand forecasting is the process of predicting the future demand for a particular product or service.

With ERP system, demand forecasting means using the system’s data analysis and reporting tools to better estimate how much customers will buy a certain item over a period of time.

Demand forecasting is essential for any trading company, as it enables them to make informed decisions about inventory management, production, and pricing. And let’s be honest, we Malaysians love a good bargain, so getting the pricing right is crucial!

With demand forecasting, we can avoid situations where we either have too much inventory, which can lead to waste, or not enough inventory, which can result in lost sales.

So, let’s embrace the power of demand forecasting with an ERP system and make your trading company even more successful!

Real-life Examples of Demand Forecasting In Trading Business

There are countless examples of demand forecasting in action in trading companies. Let’s take a look at five real-life scenarios:

• Picture this: a furniture store is preparing for its seasonal sale, and they want to make sure they have enough of its popular living room sets in stock to meet customer demand. So, they turn to their trusty ERP system to help them predict how many sets they will need by analyzing custom sales reports.

• Now let’s talk bananas. A grocery store wants to make sure they always have enough fresh bananas on their shelves, but they don’t want to order more than they need and risk waste. With an ERP system, they can predict how many pounds of bananas they will need each week by looking at sales data and market trends, ensuring their customers always get the freshest bananas.

• An apparel retailer has a lot of different products to manage, from shoes to hats to bags. By using demand forecasting with an ERP system, they can anticipate how much demand there will be for each product and optimize their inventory levels to avoid overstocking or running out of stock. That means their customers will always get the products they want and when they want them.

• An electronics retailer has to keep up with constantly changing technology and shifting consumer preferences. With demand forecasting using ERP systems, they understand which electronics products will be most popular and optimize their inventory levels and pricing accordingly. That way, they can make sure their customers are always happy with their product selection and pricing.

• Car dealerships need to make sure they are ordering the right number of each car model to ensure effective cash flow. With an ERP system, they can use custom sales reports to predict the most profitable car models and variants and make sure they have enough inventory on hand to meet customer demand. This means they can keep their customers happy while also optimizing their business operations.

Also see how stock demand forecasting helps hardware distribution business in details

Why Is Demand Forecasting Important In Trading Companies?

Let’s be real, overstocking can be a nightmare for trading companies. Not only does it tie up valuable capital, but it can also lead to waste and obsolescence. Plus, if you underestimate demand, you risk running out of stock and losing sales.

Demand forecasting using an ERP system helps you to accurately predict how much of a product your customers will buy, so you can make informed decisions about your inventory management, procurement, and pricing strategies.

With demand forecasting with ERP system, you can avoid overstocking which can tie up your valuable capital and lead to waste and obsolescence. At the same time, you can also avoid running out of stock and losing out on potential sales.

You will also know exactly what your customers want and when they want it, so you can optimize your inventory levels in the warehouse. This can lead to significant savings in storage, handling, and transportation costs, improving your bottom line.

So, if you want to avoid losing customers and revenue, make sure demand forecasting is a top priority in your business strategy.

Why Demand Forecasting Becomes Necessary In Trading Companies?

Demand forecasting with an ERP system becomes particularly important in times of uncertainty or change. It helps businesses to make better decisions about inventory, production, and pricing strategies.

Let’s take a look at some examples of such circumstances where demand forecasting plays a crucial role.

1. Pandemic

2. Supply chain disruptions

3. Price fluctuations

4. Seasonal changes

5. New product launches

Pandemic

During a pandemic, like the current COVID-19 crisis, consumer behavior can shift unpredictably.

Demand for certain products may rise sharply while demand for others may drop. For example, during the pandemic, there was a surge in demand for home fitness equipment.

Companies that accurately forecasted this demand were able to meet the growing needs of consumers and capitalize on the opportunity.

Price fluctuations 

Price fluctuations of raw materials or labor can also have a ripple effect on the entire supply chain.

If the cost of a particular product increases, consumers may switch to a cheaper alternative or reduce their purchase.

Demand forecasting can help companies cope with these fluctuations and adjust their pricing to prevent inventory buildup or shortage,

Seasonal changes 

Demand for certain products can vary widely depending on the time of year.

For instance, demand for winter coats is higher in winter months, while demand for swimsuits is higher during summer.

Accurate demand forecasting can help companies plan ahead and stock up on seasonal items in advance, avoiding costly overstock or shortages. This allows you to effectively meet seasonal demand and maximize revenue.

New product launches

When a company launches a new product or enters a new market, it's crucial to forecast demand accurately to ensure that the product does not face inventory shortages.

Companies that can effectively forecast demand for new products are better positioned to plan for production and distribution.

So, trading companies can always have enough inventory to meet demand, increasing sales and customer satisfaction.

Supply chain disruptions

Supply chain disruptions can impact consumer demand in unexpected ways.

For example, if a supplier fails to deliver a critical component, it may result in a shortage of finished products, leading to decreased demand.

Businesses that can quickly respond to supply chain disruptions and adapt their demand forecasting are able to minimize the impact of disruptions and consistently deliver to customers on time.

How To Accurately Forecast Stock Demand with ERP Systems?

An ERP (Enterprise Resource Planning) system is a powerful tool that can help you accurately forecast demand for your wholesale distribution business.

In ERP system, you can bring all your data together and bam, you get a complete picture of your business. This means you can make better, smarter decisions that will help you grow.

Here’s what you could do with ERP systems for accurate stock demand forecasting:

1. Set Reordering Rules

2. Analyze Stock Forecast Report

3. Create Custom Report

4. Define Lead Time

5. Get Inventory Valuation

Set Reordering Rules

Let’s say you own a retail store that sells clothing, and you notice that a certain shirt design is selling like hotcakes. To make sure you always have enough stock on hand, you can use ERP system to set reordering rules. Reordering rules tell the system to automatically replenish your shirt when it falls below minimum levels, so you never run out of the shirt in question.

Analyze Stock Forecast Report

Another great feature of an ERP system is Stock Forecast Report. This report estimates the stock levels for each shirt design based on current stock on-hand and incoming/outgoing stock. This report can help you plan your inventory better, so you can ensure you always have enough stock on hand to meet customer demand from time to time.

Create Custom Report

You can also generate a custom report in the ERP system based on the information you want to see. For instance, you can generate a report that compares customer segments with product sales to understand which products are more popular with a specific customer group. This way, you can tailor your inventory to meet the needs of your customers.

Define Lead Time

By accurately setting the lead time, you can ensure that you have enough stock on hand to meet demand during that time. For example, if the lead time for a product is two weeks, you need to order enough stock to cover demand for two weeks. This feature can help you avoid stock shortages and ensure you always have enough stock on hand.

Inventory Valuation

FIFO, LIFO, and average cost are common costing methods used in an ERP system. By using these methods to value your inventory, you can make informed decisions about when to reorder products and how much to order. For example, if you use FIFO, you know that the oldest stock is sold first, which can help you anticipate when you need to reorder products.

Why You Should Choose Odoo For Demand Forecasting?

If you’re looking for an ERP system that can help you accurately forecast demand and optimize your inventory and supply chain management, Odoo is the way to go!

One of the coolest things about Odoo is its dashboard and reporting tools. Not only they are super powerful, but they’re also designed to be super easy to use, even if you’re not an ERP expert. And, let’s be honest, who really is an ERP expert anyway?

But wait, there’s more! Odoo’s dashboard and reporting tools look really nice with their clean and modern design. You can easily spot trends and patterns in your data through various graphical illustrations. Trust me, nothing makes you feel smarter than being able to identify trends like a pro!

With Odoo, you can keep a close eye on your KPIs, like sales, inventory levels, business revenue, and customer demand. This means you can make informed decisions based on real-time changes in the market, not just guesswork.

But what’s really great about Odoo is its flexibility. You can customize your dashboards and reports to focus on the metrics that matter most to you. And let’s face it, as a trading company, you probably have some unique reporting requirements based on your products and markets.

So, if you want to make data-driven decisions for your business from today onwards, give Odoo a try! You won’t regret it!

Wrap Up

No matter what you are selling, accurate demand forecasting is crucial for any wholesale distribution business to thrive in the competitive Malaysian market.

And to achieve this, a comprehensive ERP system like Odoo should be your choice.

Odoo gives you user-friendly dashboards and reporting tools that give reliable insights and don’t overcomplicate things.

With current circumstances like supply chain disruptions, pandemics, price fluctuations, seasonal changes, and new product launches, demand forecasting has become a necessary strategy rather than an option.

With the help of an ERP system like Odoo, businesses can optimize inventory levels and warehouse management for better outcomes.

So if you are looking to keep your business running smoothly and stay ahead of the competition, it is time to consider implementing an ERP system like Odoo.