The last two years have seen unprecedented disruption across many businesses and industries. Businesses have found themselves struggling with inventory shortages and supply chain challenges. Not only that, many sources are warning of a potential economic downturn. Small business owners and large business owners alike are wondering how they can prepare for a potential downturn and protect their businesses despite the coming challenges.
Inventory forecasting software can help you prepare for unexpected downturns and protect your business, decreasing excess inventory and allowing you to prepare for the goods your business will really need to offer in the event of an unexpected downturn.
1. Check Current Sales
Inventory forecasting platforms can help look at your current sales and make it easier for you to judge what’s selling fast and what is no longer selling. During downturns, many consumers shift their buying behaviors.
They may be less likely to make name-brand purchases, choosing instead to purchase store-brand or less-expensive items to fit their needs.
They may choose to forego certain types of purchases during periods of economic uncertainty or instability: for example, travel may decrease, and luxury purchases may go down.
Customers may try to hold on to their existing items longer, or to make purchases of used items instead of purchasing new.
On the other hand, some types of sales may increase during potential economic downturns. For example, some consumers may make more purchases that will keep them entertained at home, since they may be less able to go out. Purchases of store-brand or discount items may go up. Consumers may also quickly buy up items that they expect to go out of stock or up in price later, since they may want to make sure that they have them on hand.
A look at your current sales can make it easier to prepare for both increases and decreases in sales, allowing you to have more inventory on hand of the items that consumers need and decreasing the odds that you’ll over-order items that consumers aren’t looking for. Inventory forecasting software can make that process much easier, since the software will help predict changes in consumer sentiment and need.
2. Examine Historical Changes
If your business has been in operation since the last hard economic downturn in 2008, you may already have a solid idea of what your customers are likely to need during a period of disruption.
What were consumers buying during that period? What sales slowed down or even stopped while consumers waited on the market to correct? Inventory forecasting software can help provide you with vital insights into what behaviors consumers engaged in during past downturns, which may provide you with more information about the potential behavior of consumers today.
3. Check Seasonal Trends
While economic downturns can have a substantial impact on consumer buying behaviors, some seasonal trends may still come into play. Consumers will naturally buy more around the holiday season, when they need to purchase gifts for their loved ones.
During the summer, consumers are more likely to buy travel-related items. Even when travel is on hold, consumers will look for vacation-related items.
Your demand forecasting software can help you check seasonal trends, then compare those seasonal demands to the items consumers are most likely to buy this year.
Even during unexpected downturns, you may still need to increase ordering of the items that consumers are more likely to buy. For example, during the hot summer months, many consumers will still want or need to buy vital items, from electronics to home essentials. Your inventory forecasting software can help give you a better idea of how your customers’ purchasing habits will likely change during those difficult periods, giving you more insights into what they need most.
4. Evaluate Your Promotions
During downturns, your promotions may have more impact than expected on your overall sales and, therefore, your inventory needs. Your promotions can influence what consumers buy and when.
Having a promotion on a specific item frequently means increased sales on that item.
However, during economic downturn periods, it may have more impact than anticipated, since your customers may end up buying more of that vital item—both to take advantage of the sale and to stock up for future needs. Your inventory forecasting software can help predict consumer response to those promotions and make it easier for you to determine how much inventory you may need to keep on hand.
5. Check the Impact of Other Events
Events in the world around you can influence consumer demand very quickly. For example, pending natural disasters could increase or decrease sales in some vital areas of your business.
After a disaster, those needs may shift again. Your inventory forecasting software can help you keep an eye on how those events will likely influence your customers’ needs. You can also check how potential supply chain disruptions could impact consumer demand, your sales, and even how you need to source your items in order to meet consumer demand.
6. Control Ordering
Over-ordering during an economic downturn can cause devastating financial losses for your business. In many cases, you may end up having inventory go bad or get damaged in your warehouses before you can sell it. In other cases, you may end up selling that inventory at a substantial loss.
Demand forecasting software can help predict the actual behaviors of consumers and help you control your ordering processes. When combined with your inventory management solution, demand forecasting can even help control automated orders, which may make it easier for you to decrease unwanted inventory while keeping up with any areas of increased demand for your customers.
Inventory forecasting software can have a number of advantages to your business at any time, but those advantages often increase during periods of economic downturn. Are you looking for a demand forecasting solution that will help your business track inventory in case of a pending downturn? Contact us today to learn more about our inventory control solutions and how they can help benefit your business.
