7 Disadvantages of Poor Inventory Forecasting

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Businesses with physical goods on hand face stock and inventory management challenges. While they tie up staggering amounts of capital in inventory, most fail to track their merchandise or leverage conventional manual approaches. This led to setbacks that increased waste and lower profits.

Any viable inventory management plan must identify the sweet spot in the inventory volume. You don’t want to keep dead stock within the premises for years. Inventory directly generates profits; hence you must get the most out of it promptly.

Jeffrey Porter with StockIQ shares seven (7) reasons to up your inventory management game through accurate forecasting.

Mistaken Operations Budgeting

Without an adequate forecast, there’s no way to achieve a precise budget for your operational expenses. Whenever the company experiences a decline in sales volumes, it is a result of inadequate operational facilities necessary to meet your product demand. But you can leverage sales forecasting data alongside smart inventory management approaches to turn it around.


Without accurately projecting your future inventory needs, you could end up acquiring excess products. Overstocking comes with its set of disadvantages. You will pay extra for warehousing and storage, and experience other losses resulting from shrinkage, obsolescence, and product deterioration.

You will need to leverage approaches like bundling, sales, and product discounts, to move the products in larger quantities. Forecasting offers crucial insights that can help avoid this trend.

Poor Customer Experience

Ordering online or at the local store to later realize that the product is no longer available could hurt customer relationships. The omnichannel environment of today offers consumers a wide variety of options. If you can’t fulfill orders within the agreed timelines, your favorite clients may be disappointed with your service and move to your competitor.

Through forecasting, you’ll make accurate predictions and have your clients get the items they need when they need them.

Losing to Competitors

Poor merchandise forecasting leads to stock mismanagement that would send loyal clients packing. The current business environment is highly competitive. If your customers are unhappy with your brand, they are likely to find your rival in just a few clicks. Most shoppers would contact a competitor rather than wait for the store to restock.

Stock and demand forecasting have a crucial role in boosting customer retention. You’ll have the necessary items at the right time, and customers will benefit from fast delivery. This, in turn, leads to an enhanced experience.

Failure to Track Industry Trends

Suppose you don’t have a reliable system to help with demand forecasting. You will be taking a wild guess, trying to ascertain the number of units you’ll deliver for a particular product. This makes you miss lucrative seasonal opportunities and could lead to significant losses that can be attributed to overstocking.

An accurate inventory and demand forecast can help you avoid such scenarios. You can check out your previous sales and compare the overall sales history for more accurate insights. Doing this will help you determine the products that record consistent sales, and you’ll understand the annual patterns.

Extra Expenses

Poor forecasting could lead to bad inventory, which may damage your organization’s finances in multiple ways. You’ll spend more on acquiring a bigger storage space and more employees to manage the extra stock. The products also need regular care or maintenance, and this means more expenses.

Poor forecasting may also lead to understocking, and this could make you miss lucrative seasons. You may also have to pay more for customer fulfillment after realizing that an order item has not yet been acquired.

Loss of Business Credibility

Poor stock forecasting and sales planning can damage the credibility of your business. Failure to fulfill your product demand, bad customer experiences, and continuously losing to your competitors are all detrimental to your company’s integrity and would lead to lesser sales revenue overall.

Achieve Better Inventory Forecasting

To stand out and maximize profits, retailers must streamline their operations and control expenses. You need accurate, real-time insights into business operations if you wish to achieve a satisfactory customer experience.

Entrepreneurs continue to restructure their inventory management to adapt to the dynamic landscape. It is only through forecasting that you can be ready for changes and buffer yourself from future uncertainties.

If you need guidance in mitigating the adverse effects of bad inventory on your company, worry do not. You can leverage the StockIQ planning suit for enhanced supply chain planning to increase visibility and improve your merchandise management through precise inventory forecasting. Contact us today if you have any questions, or if you need to check out our demo.

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