Inventory management is defined as \u201cthe planning and controlling of inventories to meet the competitive priorities of the business.\u201d While inventory management is often thought of being beneficial for only large retail and manufacturing companies such as Costco and Kevlar, it is important to realize that smaller companies can benefit greatly from inventory management.<\/p>\n
One aspect of inventory management that is particularly useful is forecasting demand. Although not always exact, forecasting demand is necessary to cut costs, meet demand, and eliminate waste. Many large companies have the assets to use sophisticated technology and software to forecast demand and manage their inventory. However, most small businesses have to do it the \u201cold fashioned way\u201d using various methods such as moving averages and exponential smoothing. These methods help to even out demand to allow for seasonality forecasts in the results.<\/p>\n
My mother\u2019s company is a full-service hotel design firm. Although hotels open year-round, many owners are in a rush to open during late spring\/early summer as well as mid fall due to the high influx of travelers during those peak times. Therefore, it is important for her company to anticipate and forecast the seasonal demand in order to have enough staff on-hand and for her vendors to have enough supplies readily available to ship to the right destination. These methods allow them to not have too many staff or too much inventory as waste and reduces their costs, as well as ensure they have enough product and supplies to meet the hotel owner\u2019s needs.<\/p>\n
Are inventory management and demand forecasting more important in a made to order (MTO) service company, like the design business, than in a non-MTO firm?<\/p>\n