Research on Optimization of Inventory Management Based on Demand Forecasting

Abstract:

Demand forecasting is the basis of the inventory management. Aiming at the problem of subjective forecasting method, we use quadratic exponential smoothing method to establish the mathematical model, to forecast sales volume of product A in every month in 2013. And based on demand forecasting, we put forward ABC classification management method to solve the inventory management issues. The research result of this paper has important implications in improving the inventory management level for many enterprises.Demand Forecasting and Inventory ManagementInventory management is an important part of enterprise management, and it directly affects the business situation of enterprises. A reasonable inventory can significantly enhance the comprehensive competitiveness of enterprises; too much or too little inventory settings would have a bad impact on the business, and some company even bog down because of inventory problems companies bogged down because of inventory problems [1-2]. To do inventory management, what should we do in the first step. The answer is demand forecast. When business scale reaches a certain level, it would need strict, systematic demand forecasting. The more accurate the demand forecasting is, the more accurate inventory planning would be, and more favorable for business enterprises.Few companies are able to be completely in accordance with the order production, and the vast majority of businesses are not waiting for orders after arrival, then determine how much raw material and manpower needed, and how to arrange production. Because it often takes a long production cycle, and no one is willing to wait a month to buy a bag of washing powder. Successful companies always make accurate predictions for product demand, and then put into production according to forecasting [3]. Due to their more accurate predictions, they can often carry out a reasonable plan and inventory management. Inventory forecasting, its essence is demand forecasting [4]. Demand forecasting provides important information for inventory management such as inventory amount, lead time, inventory turns. Demand forecasting is based on research and statistics, to make a scientific and reasonable inference for product demand. Product demand generally is within a certain period, certain market range, the number of consumers’ demand for a product. Demand forecasting results can help companies determine the amount of raw material inventory and products, and provide enterprise continuous production of raw materials needed, save liquidity and reduce inventory costs, improving the comprehensive competitiveness of enterprises.Product Demand Forecasting Model

• Periodical: Applied Mechanics and Materials (Volumes 687-691)
• Pages: 4828-4831
• DOI: https://doi.org/10.4028/www.scientific.net/AMM.687-691.4828
• Online since: November 2014
• Authors: Jia Xi*, Ping Ba Sha
• Keywords: ABC Classification, Demand Forecasting, Inventory Management, Quadratic Exponential Smoothing

References

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