Inventory forecasting is essential for the success of every business, but it requires a balancing act. It is crucial to purchase just enough stock that meets your client’s demand to avoid overstocking runouts. With the appropriate understanding of the various practices of inventory forecasting, you can use them to ensure proper planning and optimization of your inventory.
In this article, we’ll go over some of the best practices for inventory forecasting and explore the various inventory forecasting methodologies your company might utilize.
What is Inventory Forecasting?
Inventory forecasting aims to estimate the quantity of a product that must be kept on hand to satisfy anticipated sales. To achieve this, one has to look at past data, seasonal trends, market forces, and predictions of future demand. This is why many organizations use sophisticated inventory control software that often includes demand planning.
Critical distinctions between Forecast and replenishment
Understanding the nuances of the many inventory terms can be challenging when they overlap.
- Inventory forecasting is a continuous procedure that aids brands in understanding what customers will want in the future by looking at past data, seasonality, and outside factors.
- Inventory replenishment refers to placing a new order with a manufacturer or supplier to acquire more stock.
Successful inventory forecasting leads to prompt product replenishment.
Importance of Accurate Inventory Forecasting
Businesses can keep costs and cash flow stable by predicting how much stock to keep. Some of the benefits include:
Streamlining the production processes
Accurate inventory forecasting improves retail supply chain product management. Understanding the lead times, warehouse receiving dates, and stock levels for each product will enhance supplier collaboration and the comprehension of the manufacturing cycle.
Predict and meet customer demand
If you want satisfied consumers to keep coming back, you need to be ready to ship orders as soon as they’re placed. To avoid losing sales to rivals or having consumers wait for backorders, it is essential to predict client demand in advance by using inventory forecasting.
Reduced need for manual labor
Accurate inventory forecasting saves labor and storage space money by helping you handle demand changes and reduce human labor. Inventory forecasting software predicts labor demands and order volumes and automates reordering. This reduces manual work for warehouse managers and personnel.
5 Inventory Forecasting Best Practices in eCommerce
To predict what consumers want, you must consider many elements and make assumptions. Plan inventory with our simplified version.
Set a forecast period
The time frame you make projections about future demand helps you choose how much of each commodity to purchase. Understanding seasonality is easier with a yearly view, although weekly, monthly, or quarterly opinions are also available.
Observe the current state of the situation
How much inventory do you have available right now? Have you already placed orders for more stock, and what are your current reorder points? How long is the expected delivery time from each vendor? Before you can begin forecasting, you’ll need to find the answers to these questions.
Identify base demand
A product’s base demand is its actual level of interest when the projection is made and must be well identified.
Maintain your adaptability
Forecasts need wiggle room to make on-the-fly modifications. Collaborate with your suppliers to construct backup plans and generate different forecasting models and scenarios.
Consider all the relevant factors
The forecasting process is complicated by many factors, all of which must be considered for reliable results. Several of these may be associated with your actions, which include internal planning and the appropriate promotional campaigns.
How Global Logistic Solutions Helps eCommerce Business Helps in Inventory Management
Your eCommerce 3PL provider is a crucial partner for planning your inventory. With thousands of our clients, integrated technology, fulfillment services, and eCommerce warehouses, you can connect to online marketplaces easily.
Global Logistic Solutions can help with inventory management and demand forecasts. That means we are always looking for ways to improve logistics and help our client’s businesses grow.