Managing eCommerce inventory requires persistent forecasting and analysis to ensure you have enough items in your store to fulfill customer demand. Without adequate planning, operations can become chaotic — leading to disappointed customers, out-of-stock products, and revenue losses.
In this blog post, we will explore the strategies for improving your eCommerce inventory forecasting process with better planning methods that lead to better decision-making.
What is eCommerce inventory forecasting?
Inventory forecasting projects the quantity of stock you’ll need for each SKU in the coming month, quarter, or year based on historical data, seasonal trends, industry trends, and estimates of future demand.
To stay up with the speed of modern eCommerce, it’s critical to leverage the inventory forecasting capabilities integrated into your inventory management software, so your projections are based on data rather than guesswork.
Benefits of accurate eCommerce inventory forecasting
Customer Demand Prediction and Fulfillment
To keep your customers satisfied, you must have the things they require in stock when they place their purchases. Inventory forecasting allows you to plan for client demand and avoid losing sales to competitors or making consumers wait for backorders.
Utilize Inventory Management to Increase Cash Flow
Although the pandemic ended just-in-time inventories, reverting to a just-in-case strategy might restrict your business progress. Accumulating too much cash might limit your promotional budget, reducing your capacity to attract new clients.
Furthermore, you may wind up with deadstock. Deadstock is merchandise on the shelf for so long that it has gone out of style and is no longer sellable.
Improved Supply Chain Management
When you can precisely estimate client demand, you can optimize your supply chain to the ideal Goldilocks state: neither too much nor too little inventory. Inventory forecasting, in conjunction with a precise grasp of your production lead time, enables you to minimize rush charges and strengthen your working relationships with your suppliers.
Inventory forecasting methods
Quantitative forecasting
Using your past sales data, quantitative eCommerce inventory forecasting makes predictions about future sales. You can frequently build a more complete picture if you have access to several years’ worth of historical data. However, you should base your data analysis on a meaningful time frame.
For instance, data from six years ago might not be accurate for demand forecasting if the sales velocity of a particular SKU changed significantly owing to changes in consumer buying behaviors two years ago.
Qualitative forecasting
Using external data sources like market-impacting political events, inflation, trade treaty changes, and economic trends, qualitative inventory forecasting makes predictions about consumer demand.
Trend forecasting
To map changes in product demand and customer behavior, trend forecasting gives insight into your sales data and patterns in your product category. And, to estimate future demand, a trend forecast may project purchasing tendencies for specific client profiles.
Trend projections use past sales data to analyze variations in sales velocity over extended periods as opposed to seasonal demand fluctuations.
Seasonal forecasting
Demand forecasting is done using seasonal inventory data together with information on upcoming events. The timing of essential sales seasons, such as the weeks between Thanksgiving and Christmas, approaching holidays, and weather conditions, can all influence seasonal forecasting.
Graphical forecasting
Although it is sometimes treated separately, visual inventory forecasting is more of a technique for displaying temporal quantitative data and other information obtained through laborious data collecting. Forecasts of trends may be best represented graphically with line graphs or other visualizations.
In Conclusion,
With accurate data on past sales patterns and future predictions of product demand, businesses can make well-informed decisions about their purchases and shipments to maintain a healthy inventory level. And to have more tools and methods to implement successful eCommerce inventory forecasting, contact us today!
