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How forecasting can increase your net profit?

Mar 7

When the supply chain and consumer demand are undergoing rapid changes, an accurate forecast is invaluable. For effective forecasts, a combination of data analysis, industry experience, and customer insight is required. It is analogous to looking into a crystal ball and predicting future demand. There are several factors that affect future demand. A variety of factors can impact your business' revenue to some extent and some factors have only a minimal impact. If you need inventory forecasting tips for inventory management Amazon or any other E-commerce business like Walmart, eBay consult our experts at Urtasker. 

What Is Inventory Forecasting?

The practice of forecasting inventory levels using past trends, past data, and upcoming events is known as demand planning. The ability to forecast accurately will enable businesses to meet their customer orders while reducing the amount of cash they are tied up in unnecessary inventory. 

Using forecasting to determine reorder points and adapt to dynamic conditions is much more than simply setting a reorder point. The reorder points are an important component of inventory forecasting, however there are many other factors involved. Inventory Forecasting Software is in increased demand these days by E-commerce sellers due to an influx of millions of customers preferring online shopping. 

Inventory Forecasting Benefits

It is possible to differentiate between profitability and a pile of unsold products by using inventory forecasting. Businesses that make effective use of this data can better predict future trends, reduce storage costs, and satisfy customers.

Top 4 Benefits of Inventory Forecasting

You may need to invest considerable time and resources into creating and updating your inventory forecasts. However, when demand forecasting is carried out correctly, you may see several positive changes in your business. The following are some positive outcomes which you may observe. 

  • Expense savings

Efficiency is the key to success. In order to take advantage of bulk orders, you should order an optimal amount of product instead of accumulating unnecessary inventory. In addition to these unneeded supplies, warehousing space is also required, adding to the cost.

  • Satisfaction of customers and suppliers

In addition to providing a positive customer experience, maintaining stock on hand increases the chances of repeat business. You should also be aware of the supplier's processes and timelines in order to minimize stock-outs. Additionally, you are able to keep a healthy relationship with them as you are able to reduce emergency calls and improve communication.

  • Improvements to the back-end

The supply chain and inventory are closely related to each other. The effectiveness of your supply chain management is enhanced by forecasting demand in advance to ensure stock levels are adequate. The automation of supply chain management could also lessen the amount of manual labor that goes into managing inventory and supply chains. This can be achieved by automating reorder points and other steps in the supply chain management. By integrating your inventory management software with your E-commerce platform, you can keep your forecasts current with the latest information.

  • Insights on strategy

A better understanding of your enterprise's communication needs can help you achieve business goals - and inventory forecasting can have a valuable role to play. Inventory managers can ensure that there is sufficient inventory to meet customer demand by examining past performance and expected outcomes of a marketing campaign. In addition, bulk purchasing may allow them to cut some costs. With the right inventory management strategy, your inventory management team can be able to influence your KPIs such as profit margins.

  • Ensures minimal stock outs

Loss of sales revenue is caused by stock outs. By accurately forecasting future demand, inventory forecasting can prevent this. By obtaining this information, you can better determine the best time to restock and the appropriate number of units to order.

  • Reduction in the costs of inventory holding

Forecasting inventory contributes to the management of overall inventories. You are able to manage your inventory better by buying only what you need and storing only those items instead of ordering excessive quantities. The result is a reduction of unused storage space, which in turn reduces the associated costs.

  • Ensures reduced product waste

It is possible to determine which items are selling slowly or not at all through inventory forecasting. In this way, the items can be repurposed or bundled with products that will be more profitable. As a result, warehouse space is freed up and revenue is increased.

Four Types of Inventory Forecasting

Forecasting inventory can be done in four ways.

  • Trend forecasting. Based on trends in demand for the product you are forecasting, look at how the market may evolve in the future. There is often no adjustment for seasonality or other irregularities in previous sales statistics. By using past growth and sales data for projections, this method eliminates seasonal effects and irregularities.
  • Graphical forecasting. You can identify possible insights by graphing historic data, even if you are not familiar with the topic. For some forecasters, the graphical method is preferred because it allows for more visual analysis and insight. Using data points, they can interpret patterns and plot sloped trend lines to analyze possible trends that might otherwise go unnoticed.
  • Forecasting qualitatively. Market research and focus groups are usually key to qualitative forecasting. These data form the basis of models developed by forecasters. 
  • Forecasting quantitatively. In this process, numerical data from the past is used to make predictions about the future. For more accurate forecasts, a larger set of data must be gathered. As a rule, the more data that a company possesses, the more accurate its forecasts are. 

What Are the Best Inventory Forecasting Practices?

The best practices for inventory forecasting that improve your profits

  • Ensure that data is accurate

It is a common practice for many organizations to neglect the data, forgetting that data plays a crucial role when attempting to advance their business. It becomes a problem when you disregard the power of data in the future, as this means that you will not be able to use it in the future. Hence, accurate and complete data are important. This is of particular relevance to retailers. In their words, "data is the key to a successful business.".

  • Planning and estimating the future

It is beneficial to have an idea of what is to come. This will assist you in determining how many items you will require to stock your warehouse. The same goes for special periods and days during the year when your business will be heavier than usual.

In some cases, the business will slow down, and in others it will increase. Taking into account the earlier information, you can predict your stock administration without much of a stretch.

  • Take advantage of efficient software

An inventory forecast can only be accurately predicted if you have accurate data. To obtain accurate data, you should use an inventory management application. For instance, you will be able to access information in real-time, and you will always have a clear understanding of your current inventory. In addition, it will also prevent you from having to deal with overstock or out-of-stock issues.

  • Work collaboratively with other teams

Even though you may have all the tools necessary to conduct inventory forecasting, it is not a simple process. Collaboration with other teams is essential to effective inventory forecasting. Different teams can provide information and contribute to making the process more efficient.


There is no certainty in life. Nevertheless, as long as one is prepared, there is an opportunity to be taken advantage of. It is important to note that forecasters cannot provide guarantees. An alternative approach is to examine the social and economic undercurrents that might lead to a variety of options and make plans as necessary. With inventory management software, you can reduce finances tied up in unneeded inventory while meeting customer demands. We hope this article helps you understand forecasting and how it can save you a lot of time.