The challenges that distributors face in forecasting inventory are multiplied exponentially when those distributors are sourcing product from overseas. The following factors must be considered when forecasting the availability of inventory for imported goods.
- Production Time-This information will need to come from the factory but if you are regularly re-ordering the same products then you should be able to set an average production time at the product level which can be used in forecasting
- Factory Reliability-(how valid is the quoted ETD) the cheapest factory isn’t always the best factory if they are not reliably shipping when they say they will.
- Method of Transport (Ocean, Air, Rail, Truck)-We suggest using a grid where each row represents a unique combination of Ship From, Ship to, and transport method. Each of these unique combinations is assigned a default transport days. For example shipping Shanghai to New York via Ocean is 30 days. This will simplify estimating shipping times on each PO.
- Ship From Location and Ship to location-see above
- Consideration for Customs Hold/Exam-it varies by port but it is estimated that 2% of all containers are held up at customs for examination. If you want to get fancy you may want to factor this into your calculations
- Drayage-how many days does it take to get the container from port to warehouse (or customer if shipping direct)
- Actual Sales-These are the sales that you have already booked. Estimated or promised delivery times should be considered
- Projected SalesAlso important to know when calculating how much product you will need is how much of a product do you expect to sell in the future. The two most common methods of forecasting sales is by taking an average of sales based on history, or for more seasonal items it makes more sense to use sales from the same month in the previous year (plus or minus a growth factor). For example, if you sell chemicals used in toothpaste then I would suggest taking the sales of the last 6 months and then divide by 6 to estimate the forecasted sales for each of the next 6 months. This is because you would expect the end use for this product, toothpaste sales, to be relatively steady. On the other hand if you sell Christmas lights then it will make much more sense to use the sales of that product for the same month in the previous year to forecast what your sales would by by month in the current year since you would expect sales of Christmas lights to be more significant in the months leading up to Christmas
VISCO Software for importers offers a tool called “Product Position” that pulls data from the database to help user forecast the availability of inventory in the future.