Inventory Proposal

Inventory Proposal

Companies that depend on seasonal trends to earn profits should closely monitor inventory and have the ability to forecast. According to Berenson, Levine, & Krebhiel (2004), forecasting is one technique that can aid in planning for future needs. The knowledge of forecasting can be very valuable as a business tool to help a company surpass competitors, remain in the market, and thrive. In this proposal, we will describe Winter Highs, evaluate the inventory problems, propose a solution using seasonal indices to analyze the inventory data, construct a histogram, and forecast future inventory costs using the time value of money concepts.

Companies of all sizes can implement forecasting as a method to predict future trends and make effective business decisions. An analysis of the inventory data will provide a clear picture of the trends, which may occur throughout the year and reveal profit and losses through some months of the year. As a seasonal type of business, Winter Highs depend on good business decisions based on quantitative reasoning skills such as forecasting to supply the business with ways to maximize profit and minimize loss. For the purpose of this proposal, Winter Highs can be described as a clothing and sporting goods store which specializes in winter wear and gear to provide customers with the necessities to survive and enjoy the winter months.

Inventory management problem

Due to the nature of the business, the organization will need to have accurate predictions to assist with the decision making of product to avoid loss. This is particularly important since product sales are the key to remaining in business. The negative return of inaccurate predictions may prove to be very devastating. When managers overestimate potential sales and purchase more merchandise than needed, the store may eventually incur a loss since they may have to reduce the price of the remaining inventory. Fashion may also contribute...