ABSTRACT
Businesses make large investments in inventory. Much of it could be avoided if there were better forecasts of demand. This is relatively inexpensive, but requires understanding, communication and commitment. Detailed analysis of demand, both historical and anticipated, provides better forecasts. These are generally based on knowledge of the customer's markets. If the major factors which cause the demand can be identified, then a model can be created. Models are very effective where there are leading indicators, and where there are simple deterministic relationships causing demand. The market is continuously changing, mainly as a result of technology, fashion, values and legislation. Products therefore have a life cycle which can be simply divided into three phases: introduction, supply and obsolescence. Old product lines are not of interest to sales and marketing, but are very important to inventory planners. Poor control here is a major cause of excess and obsolete stock.
