What Does Inventory Forecasting Entail?

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Inventory forecasting involves the use of business data to ascertain the necessary inventory for fulfilling future orders. The process is based on your estimated sales over a given period and relies on factors like historical sales information, previous purchases, current demand planning, and planned production. Some symptoms of poor forecasting include:

  • Inadequate control and visibility over merchandise that could lead to higher part costs
  • Reduced business productivity and unnecessary time wastage as you look for missing items
  • Inability to track the coverage of inventory, hence missing claims
  • Lower asset utilization and downtime when searching for missing items
  • Diminishing client satisfaction thanks to delayed deliveries

If you experience any of the these signs, it may be time to upgrade your inventory management approach through precise forecasting. Fixing the loopholes promptly helps you avoid further setbacks that would lead to customer loss, reduced sales, and business failure.

Disadvantages of Poor Inventory Forecasting

If your company still uses ineffective inventory anticipation methods, you will experience several future problems. You’ll have a hard time maximizing your returns on investment and damage your brand ultimately.

Here are more reasons to up your inventory management game through accurate forecasting:

Inaccurate Operations Budgeting

There’s no way to achieve a precise budget for all your operational expenses without an adequate forecast. Whenever the company experiences an unexpected decline in sales volumes, it is a result of inadequate operational facilities necessary to meet your product demand. But you can leverage sales forecasting data alongside smart inventory management approaches to turn things around.

The insights help you acquire the right talent, equipment, and inventory to address the increasing demand for your brand as and when it happens.


Without accurately projecting your future inventory needs, you could end up acquiring excess products. Overstocking comes with its set of disadvantages. For instance, you will pay extra for warehousing and storage, and experience other losses resulting from shrinkage, obsolescence, and product deterioration.

You will be forced to leverage approaches like bundling, sales, and product discounts, to move the extra products in larger quantities. Fortunately, forecasting offers crucial insights that can help avoid this trend.

Poor Customer Experience

Ordering online or at the local store to later realize that the product is no longer available could significantly dent customer relationships. The omnichannel environment of today offers consumers a wide variety of options. If you can’t fulfill orders within the agreed timelines, your favorite clients may be disappointed with your service and move to your competitor the next minute.

Through forecasting, you’ll make accurate predictions and have your clients get the items they need when they need them.

Losing to Competitors

Poor merchandise forecasting leads to stock mismanagement that would send even the most loyal client packing. The current business environment is highly competitive. If your customers are dissatisfied with your brand, they are likely to find your more organized business rival in just a few clicks. Of course, most shoppers would contact a competitor rather than wait for the store to restock.

Stock and demand forecasting has a crucial role in boosting customer retention. You’ll have the necessary items at the right time, and customers will benefit from fast delivery. This, in turn, leads to an enhanced experience.

Inability to Track Industry Trends

Suppose you don’t have a reliable system to help in demand forecasting. In that case, you will be taking a shot in the dark, trying to ascertain the number of units you’ll deliver for a particular product. This makes you miss out on lucrative seasonal opportunities and could lead to significant losses that can be attributed to overstocking.

An accurate inventory and demand forecast can help you avoid such scenarios. You can check out your previous sales and compare the overall sales history for more accurate insights. Doing this will help you determine the products that record consistent sales, and you’ll understand the annual patterns.

Loss of Business Credibility

Poor stock forecasting and sales planning can also dent the credibility of your business. Failure to fulfill your product demand, bad customer experiences, and continuously losing to your competitors are all detrimental to your company’s integrity and would lead to lesser sales revenue in the long run.

Achieving Better Inventory Forecasting

The current business environment is highly competitive. To stand out and maximize profits, retailers must streamline their operations, control expenses. Most importantly, you need accurate, real-time insights into the business operations if you wish to achieve a satisfactory customer experience.

Savvy entrepreneurs continue to restructure their inventory management to adapt to the dynamic landscape. It is only through forecasting that you can be ready for changes and buffer yourself from future uncertainties.

If you need guidance in mitigating the adverse effects of bad inventory on your company, worry not. You can leverage the StockIQ planning solution for an enhanced supply chain planning to increase visibility and improve your merchandise management through precise inventory forecasting. Contact us today if you have any questions, or if you need to check out our demo.

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