How do you accurately forecast inventory

How do you accurately forecast inventory?

A robust inventory forecast is crucial to the financial success of any business, regardless of whether it’s an eCommerce site or a brick and mortar store. Missing sales opportunities arise when there is insufficient inventory. Your shelves are full of excess stock, which ties up cash you could use to improve your business in some other ways. 

As a part of this article, we will discuss some necessary factors for inventory forecasting and some best practices. Please check out Inventory if you are in search of inventory forecasting software. It has all the functionalities you need for forecasting. 

Exactly what is inventory forecasting?

Forecasting inventory is the process of determining the amount of product you will sell over a certain period. This is done to ensure you have the correct amount of inventory on hand to fulfill future customer orders. To be as accurate as possible, they take historical sales data into account as well as planned sales promotions.

For accurate inventory forecasting, what factors should be considered? 

As a result, forecasts of demand for goods and services in both the short and long run can be made based on several factors. Understand the following terms and concepts before learning how to forecast inventory. An inventory system such as an Amazon inventory management system considers all these factors. 

Forecasting period

In inventory planning, a forecast period indicates how long you will need to order a specific quantity of inventory. You will need to determine how fast your inventory turns over or how quickly you sell your products to determine the right period. You will likely repurchase new inventory more often if you sell through your inventory quickly.

The latest trends

Over a certain period, a trend is defined as a change in demand. The sales of ski equipment, for example, show a significant seasonal trend during the winter months. Based on this information, they know that order volumes will increase as winter approaches and decrease when spring arrives.

Even more granular analytics can be performed by analyzing trends across different combinations of product SKUs or a customer’s lifetime with you:

  • Customer repeat purchases are common with you?
  • Every time a customer orders from you, do they buy multiple items?
  • What are the most commonly purchased products together?

Using this information, you can predict any repeat purchases you might make as you acquire new customers. Keep an eye on the products that your customers are likely to purchase together in order to gain insight into their behavior. This will help you create new offers and promotions that they will appreciate. If you analyze demand over time, you may discover patterns of how certain SKUs affect other SKUs.

Optimal stock level

If the inventory count is full in a bin or shelf for a given SKU, this is the ideal stock level for that SKU. Depending on your funds and inventory storage space, you might want to range up to this number. A single SKU cannot take up more space than it is allocated.

Reordering point

To fill orders, your inventory will deplete, so you’ll have to replenish it when it drops to a certain level. The reorder point is the creation of a new purchase order with the quantity specified. Rather than simply a notification of almost out-of-stock, reorder point formulas are proactive and strategic.

Adding up the following number of days will give you a reorder point for your products:

  • The time it takes for your manufacturer to ship inventory to you (also called the lead time from ordering new inventory to it arriving at your warehouse)
  • The turnaround time for inventory receiving at your warehouse or retail fulfillment provider
  • If a spike in customer demand occurs or if there is a delay on the manufacturer’s side, the number of safety stock days you should have

Inventory forecasting best practices

Inventory forecasting is made easier by good inventory management. To put the right inventory forecasting processes in place, here are some fundamentals you can follow.

Collaborate with other teams

Inventories cannot be forecasted in isolation. Owners of companies must include all ‘key stakeholders in the development of their business. These include those in operations, finance, marketing, product development, and so forth. The unique perspectives and input of each group go into making the best possible forecast.

Make the most of your data

Knowing how your inventory has historically moved will help you determine when to reorder it. 

It is important to use the sales and inventory data you have gathered in the past to make proactive and sensible decisions. You can use a consistent forecast period and be able to repeat the process.

The stock level can be viewed in real-time

Accurate, timely data are essential for predicting future demand. Keeping track of your inventory in real-time helps you keep track of your actual inventory levels and monitor whether your estimates were accurate or way off. To determine why their estimates weren’t accurate, identify the underlying cause. It will be easier to make an accurate forecast if you know why this happened in the past.

Select the right software

To replenish inventory at the right time and in the correct quantities can feel like solving a jigsaw puzzle that is constantly evolving. Your starting point should be to consolidate all of your data across all distribution channels. It is impossible to succeed if you store your data in silos.

If your business is large, features a large catalog, and is highly complex, be sure the software you use has all the functionality you need. A standalone inventory forecasting tool might work for you, or a full-service fulfillment companies solution like Inventooly that alerts you when to replenish inventory might.


At the end of the day, it is still just estimated that we use for estimating demand, no matter how good. As you continue to review the stock count, inventory turnover, and other trends within the customer orders, you’ll be able to make more accurate short- and long-term plans.

Look into Inventooly if you’re seeking inventory management and forecasting tools. Inventory is accessible from all the sites where you sell online, so you can easily access your inventory. You can also use Inventory for Amazon inventory management system for keeping an eye on stock levels, 

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