Development of a Business Forecasting Software (Essay Sample)
this was an inventory control assignment that explored how companies use enterprise resource planning (ERP) systems to reduce dead stock. ERP software is necessary for determining the point at which stock should be declared dead. additionally, the paper outlines the benefits of ERP systems and recommends the most suitable in-built software (Microsoft Excel) that can be used if the company does not have the capability of implementing cloud-based systems.source..
BUSINESS FORECASTING SOFTWARE
By (Student’s Name)
Business Forecasting Software
An enterprise resource planning (ERP) system is a software deployed by organizations to plan, organize, and schedule business processes within the company to improve quality and service efficiency (Moura, Santos and Silva, 2016). ERP systems are often used when repetitive organizational tasks involve the computation of large datasets to enhance accuracy and integrity of the information being processed. Multinational organizations deploy robust ERP systems that use the company’s data such as daily transactions, sales volumes, market analysis, and consumer profiling to provide comprehensive analysis of how the firm can implement long or short-term strategic plans for specific products or services (Pekša, 2018). ERP is a significant software used for inventory management and control to ensure that the company stocks enough goods according to the current demand. Inventory control is a significant measure to ensure that the company reduces dead stock to achieve maximum profits. Some of the renowned companies that offer outstanding ERP systems include SAP, Netsuite, and Sage. The systems are usually optimized to suit specific organizational needs by assessing frequent business processes.
ERP and Inventory Management
An inventory refers to the company’s assets or products that should be sold to realize return on investments. Companies use inventory control systems to determine the frequency of releasing new products. Dead stock refers to products that have overstayed in the shelves or stores without attracting substantial consumer demand. They could also be obsolete products that have exceeded their expiry dates, rendering them unusable. This becomes a liability to the company since the products can no longer contribute to the projected profit goals. ERP systems measure the company’s assets and evaluates various factors in the industry that favors or threatens the firm’s existence to help managers make informed decisions before releasing new products to consumers.
Companies can implement inventory control mechanisms by utilizing ERP systems to reduce dead stock in the following ways:
Dead Stock Identification: The loss of considerable customers, entry of new competition, end of voluminous sales campaigns or product lifecycle are potential factors that can lead to the compilation of dead stock. ERP systems can leverage this by emphasizing priority on the sales turnover, product value, and shelf life. This helps the company determine the surplus products that should be excluded from the inventory. ERP provides forecasting analysis to estimate the precise quantity needed for each product so that future purchases are tailored according to specific projections.
Stock Monitoring: ERP systems utilize effective databases to that generate regular reports on supplies, purchases, and other transactional processes within the organization. These statistics are usually used to update the central repository that monitors the firm’s inventory and displays precise quantities of each item to facilitate in the purchasing process.
Elimination of Dead Stock: The ERP system always captures detailed information of every commodities purchased before they are stored in the warehouse. The expiry date of each item is filtered to ensure that it does not surpass the allocated timeframe before being released to the market. The filtered goods can be given out as promotional offers if their expiry dates draw closer before they are sold. The database is regularly updated so that the newly-acquired products can be prolonged in the warehouse as the company releases the old ones.
Benefits of ERP Systems
ERP systems are cost-effective tools for streamlining repetitive business processes and evaluating the company’s performance. The integrated systems use dashboards that offer comprehensive analysis of the inventory to ensure that the company strives to address market demands using relevant goods. They model the business to help managers understand how different functions are run within the organization. If there is a change in the management, the new team will quickly adapt to the company by referring to the workflow mapped by the system. This enhances the firm’s relevance amongst its long-term customers despite changes made in the managerial team. The advantages include:
Standardization – This creates and enforces the best-practice design to ensure that the company maintains design standards of each product.
Improved efficiency – Automated inventory control facilitates effective decision-making as the company strives to balance the market demand with the relevant supply.
Enhances transparency – The company is in absolute control of the entire stock, preventing any individuals from selling products privately. This also enhances accountability through comprehensive sales reports that reflect the actual quantities released from the warehouse.
How Companies Determine Dead Stock
Dead stock refers to any unsold products that stay in a warehouse for a prolonged period. Besides taking up valuable space in the warehouse, dead stock also becomes a liability since it can no longer generate any significant revenue. Companies consider various factors to consider whether the stock is dead or still valid. This may include checking whether the products in question have surpassed their expiry dates. Expired goods are generally disposed if they cannot be used for other different purposes. Poor sales primarily contribute to the compilation of dead stock in the warehouse due to more appealing competitors, high pricing, or selling obsolete products. Goods that are no longer relevant to consumers are also considered dead stock since they lack substantial market demand. This might compel a company to lower their prices so that they can be cleared from the warehouse. Consumer purchasing behavior is influenced by various dynamic factors that the company must account for to thrive in specific market segments.
Customers often prioritize quality and standards, meaning that they cannot buy substandard or defective goods. Once a product becomes defective, its value decreases significantly, rendering it a dead stock. Defectiveness may result from poor handling or processing of goods, which reduces their shelf lives. Companies can leverage on this by establishing Quality Assurance (QA) departments to verify the quality of each product before it is accepted in the warehouse. The QA team enforces product specification by outlining the minimum requirements that products must meet before they are included in the inventory.
Microsoft Excel in Inventory Control
Microsoft Excel is an inbuilt computational tool that can be used as a low-cost alternative by small and medium-sized enterprises to manage their inventories (Yurov, 2018). Excel is familiar amongst many computer users, making it an ideal software for managing stock at basic levels. The software has inbuilt functions and formulas that automates calculations such as percentages, subtotals, and averages. The what-if analysis is a statistical tool that can be used to project the outcomes of organizational goals. This tool tells users how the possible outcome would be if a formulae is modified by either adding or reducing the cell values (Yelshin and Yelshina, 2018). What-if analysis can be used to create scenarios of how stock can be sold to various consumers at different seasons. The company can seek a goal by using data tables that contain inventory information and project the sales volume over a specified duration. Although excel does not have robust capabilities like ERP systems, they have advantages that make them stand out in specific forecasting environments, which include:
* The analyzed data is readily available in the computer, which allows users to perform thorough scrutiny and verify the records’ authenticity
* It primarily uses numerical data, which can help the organization order precise amounts
* The analyzed statistics can easily be copied into another file and updated
* Most computers have the necessary capabilities to support all excel functionalities and store large files of the same format
* The company does not incur unnecessary costs of installing complex systems
Despite its user-friendliness and verifiable data, excel also have drawbacks that make it unsuitable for facilitating inventory control. These disadvantages include the following:
* Historical analysis cannot be used for interpreting new trends such as consumer preferences
* Data is prone to physical distortion since files are usually stored in standalone computers
* Excel does not have the capabilities of identifying the major turning points in forecasting
* It is not suitable for long-term projections since computational errors are rarely noticed
* Excel does not allow users to collaborate since each person works on the budget from their computers, making it difficult to conduct comprehensive organizational forecasting.
Other Industrial Applications of Excel
Microsoft Excel is a default software in the Office Suite that can be utilized at both domestic and enterprise levels. The tool was primarily designed to store and compute numerical data using inbuilt functions and formulas. MS Excel is widely used by startups as an inventory management tool as the business grows to integrate other robust ERP systems. Bes...
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