It is crucial to have an accurate inventory forecast. It becomes more mandatory in times when supply chains and consumer demands are constantly changing. It requires a mix of data analysis, experience in the industry and customer insights to get the forecasts right. It helps to predict future demand. Market is unpredictable and everchanging and something as insignificant as a product placement by a Tik-Tok influencer could clear out ones stock in seconds.
Factors can be key or surrounding. Some factors could have a major impact on revenue, while some will only have a mild effect.
Vital data elements required for accurate inventory forecasting include the following:
Current inventory levels
Outstanding purchase orders
Forecasting period requirements
Expected demand and seasonality
Maximum possible stock levels
Sales trends and velocity
Customer response to specific products
Inventory forecasting is also known as demand planning — a practice of using past data, trends and known upcoming events to predict needed inventory levels for a future period. Correct forecasting supports businesses to have enough product to fulfill customer orders and not tying up cash in unnecessary inventory. Forecasting is more than just setting a reorder point — it’s using data analysis to identify patterns and trends to adapt to dynamic conditions and meet customer demand. Reorder points are one important piece, but there is a lot more to inventory forecasting.