It is expected that when you are planning to start a business or are already running a business online, you will be ready to bear any uncertain circumstances. The rule of starting any business is that one should always consider having some kind of backup always available in the hands. However, he doesn’t have enough money to stock and maintain the things in the backup area when running a single ownership business. This factor results negatively in the growth of the company.

What is Inventory forecasting?

If we directly jump into the definition, it could also be known as Demand forecasting. Because inventory tends to stock, and the stock is stored and sold in response to the people’s demands, that is why it is also called Demand Forecasting.

In addition to this, we can understand the concept of an inventory forecasting management system as the process of stocking up the goods in the storage rooms when the demand for something increases, or you have observed a solid amount of sale of anything within your products.

Essential factors for identifying the actual inventory forecast:

When we talk about forecasting, it is the process of determining what the situation would be regarding the future. But it is not done right away because there is no surety that the forecast will be accurate and will not oppose the situation.

Let us understand it with an example; Almost all of us are fond of listening to the news daily either on our home televisions or even on our cell phones from youtube; we are connected with the world. However, it also sometimes becomes true. The weather predictions are being made daily of rain or landslides in the northern areas, but they also fail twice or even more.

The thing is that forecast is just not made without thinking and focusing on some essential things; these crucial factors include;

  1. The period of the forecast,
  2. Analysis of the trend of the estimates, and
  3. The demand basis.

Above these three are the essential factors that should be undertaken before making a good forecast related to anything. Similarly, it goes for the business matters also. When running a large selling store, for instance, electronics, you have to observe the fact what type of machinery is currently a hot selling product. On the other hand, you also have to keep what is costing you a significant investment but not result in a handsome amount of revenue.

Techniques or Methods of Inventory Forecasting Management:

As we have gathered the basic concept of inventory forecasting management, now would it be appropriate to discuss how we do it?

It is no surprise that today, big companies running the most selling stores in the world are growing by the second, but how? They would have some techniques and formulas to operate their business’s workings. Their stock handling system, communication system, or financial system would be unique and healthy, generating profit for them.

Therefore, we need to understand what methods or basic and essential techniques one could use to make his business successful and long-lasting? So below are discussed the two main techniques of doing accurate or healthy inventory forecasting;

Qualitative Method:

The first and most frequently used method of inventory forecasting is a qualitative one. It simply means that you have to predict the conditions of the future based on some significant picture factors like; government or political problems, climatic situations, or based on the rough judgment of the experts. In short, qualitative forecasting does not involve past experiences. However, it is based upon the current market research situations.

Why use this method?

There are numerous reasons one could observe for using the qualitative method to forecast the business’s inventory. Some of them are discussed below;

  • The forecast is based upon the data, which excludes inadequate information if any.
  • The Customer’s behaviour is observed.
  • Better sales estimation is made by taking the opinion of the experts.

Quantitative Method:

Another essential technique, that all great and successful people employ is the quantitative method. Wonder why? Because it has greater chances of being accurate than that of the qualitative forecasting method.

Therefore, in the quantitative forecasting method, you can take all the past data and make your current decision based on past analysis, even if the data is one year, two years, or ten years. However, it is a well-known fact that the more the information is recalled, the chances of accuracy increase.

Why use the quantitative inventory forecasting method?

Let us discuss what would you get if you employ the quantitative method for the inventory forecasting management of your business;

  • It helps to attract the investments of the new stockholders on a large scale.
  • It recalls the history and makes decisions afterwards, which is a respectable point.
  • It does not include current or past inflated situations so that the data could be more accurately organized.
  • A quantitative method for inventory forecasting management could help you even more in terms of joining the trend patterns from the current analysis with that of the past ones.

Benefits of Inventory Forecasting Management:

As we have talked about above, using effective techniques and methods, you can easily contribute positively to the growth of your business. Forecasting is an essential part of any business because without predicting the future, one could not ever be sure about what will happen next.

Therefore, forecasting is also known as “planning.” However, the planning could be related to anything that connects with your business, based on your products, current selling, demand, past selling methods, and many other things concerned with when the forecasting is done.

In this article, you will be given the primary and essential benefits you will surely get after planning efficiently and doing the correct inventory management forecasting. So let us dig in;

Savings of cost:

It is a known fact that cost plays an important role when it comes to management. However, it is for current purposes or future ones. Therefore, when you have all the means to do the right and effective inventory forecasting, you can save a lot of costs.

If we go into further detail, when one is doing the proper planning, he can attempt to save on unnecessary things. For instance, “right order at the right time.” This is the primary rule that can help you save cost; the order is just made when needed, and no unnecessary costs are spent on the products that are no longer required.

Customer’s behavior is observed:

Another main benefit that you can get by doing the proper inventory forecasting management is that you will recognize the correct consumer behavior. We all have heard that no business can be successful when it ignores the Customer’s response. Because without customers, there is no business that could ever be successful. Moreover, customers are the basis of recommending your products and services to their friends and relatives, which leads to the growth of your company’s sales.

Helps in improving strategic work:

Strategic works are essential and must be given a specific focus in terms of business dealings. I was wondering what strategic operations include?

  • Estimation of profits.
  • Analysis of your inventory with that of the business’s objectives.
  • Cost spending estimations on stocking and selling.

There is no doubt that when a person is organizing all the areas of the business effectively. This includes; carrying out the necessary efforts to minimize the costs, expanding the profit ratio, and analyzing the levels of stock preserved and needed to be excluded. All these factors combine to form effective strategic planning for your business’s growth.

Assists in the Segmentation of products:

When you are doing the proper planning and using the correct methods for forecasting, there is a surety that you will get whatever you desire. Similarly, another primary benefit that you can derive from inventory forecasting is that you can easily classify the products and divide them into segments and groups.

The Segmentation and grouping of products will enable you to get a clear picture of which products are generating a higher amount of profit. On the other hand, Segmentation also helps you know which products are considered waste, so you can stop their stocking and focus on what is essential.

Sales are increased and estimated more accurately:

There is no doubt that when you are doing the correct and observed forecasting of your inventory, the sales of your business increase in the result. Because your forecasting helps you recognize which products are deriving the public’s attention and at the same time generating a handsome amount of profit.

Therefore, you can know your weekly and monthly sales ratio when the correct forecast is carried out. In addition to this, it helps you make decisions about consumer behaviour, what people like the most, and what you are doing wrong.

Excludes the waste products:

when you have effectively arranged and classified forecasting and stocking of your inventory, as discussed above, it leads to cost savings. Similarly, you benefit from reducing and excluding the products that are just a waste for you and your business.

Therefore, when you have done the inventory forecasting with detailed observations, you can see that most of the products that do not generate any helpful revenue are excluded. It helps you to save your cost as well as your storage space. As a result, you could utilize it to store and stock the products that are favourites among the public.

Practical tips for doing Inventory Forecasting Management:

When running a business for a long time, you know exactly what techniques would lead to profit. And what you should avoid to lessen or eliminate the loss factor in your business.

However, if you are new to the business world and running it for the first time, you have to be careful in every step. Similarly, to do effective and profitable inventory forecasting, you have to do a bit of research to know what you have to do precisely. Some of these essential tips and tricks are discussed below to perform efficient inventory forecasting;

Divide multiple forecasts from the past:

Another important tactic that you can use to manage inventory forecasting more effectively is dividing the past forecasts. But one would wonder why they separate?

The answer to this question is that when you use a quantitative method of forecasting your inventory, past trends are of keen importance. Dividing them into segments or groups could make it easy for you to observe when the demand increases and why. Therefore, dividing the past forecasts is also an important trick you could use to make the correct assumptions.

Backup plan for any uncertainty:

It is no secret that every business involves risk, whether it is of a high level or minimal one. Therefore one should always be prepared for the risk factor. Uncertainty always comes uninvited, so you need to have a backup plan for every possible situation that might cause you loss.

Companies that are earning significant revenue and are stable enough to take countless orders in a single day always have a backup plan. In addition to this, you could dodge every possible threat and be relaxed in every pending case by planning for the worst-case situation.

Look for companies similar to yours:

It is a fact that there are millions of companies out there performing similar business, selling the same things, providing the same services, and even located in the same areas. So instead of being competitive and jealous of them, you should see the positive steps they have taken to maximize their sales and profit ratios.

It is no shame to get guidance or help from someone. Therefore, observing the companies more successful than yours and doing a little research could help you get far enough and solve the difficulties you face in unexpected situations.

Give importance to the Customer’s response:

Customer review is an essential part of the success of any business. As long as your customer is happy, you can live in a world of serving. Therefore, it is without a doubt significant that your Customer is satisfied with your products and services. One happy Customer is equal to 10 newcomers and vice versa. You wouldn’t want the situation to be the opposite in this case, and to do so, all you have to do is examine the demand and likes of your customers.

Excluding the things, they don’t like would build their confidence in your company. So try to give as much importance to the Customer’s responsibility as you can.

Top Software for Inventory Forecasting Management:

We have covered almost every aspect of inventory forecasting; now, we should move to the best software that would help you plan things about the inventory of your business and ride it on the paths of eternal profits. So following is the list of top software that could assist you in the relevant regard;

  1. Orderhive
  2. InFlow
  3. Lightspeed Retail
  4. Upserve
  5. Megaventory
  6. Zoho inventory.

Apart from these, our feature-enriched, Inventooly is a highly flexible and reliable inventory management tool that can help in good inventory forecasting by minimizing the risk of stock-outs. We are here to help you to make smarter decisions for better inventory management.


Above, you can get all the guidance one would need to plan his inventory forecasting effectively for the smooth and successful running of the business. No one would want his share of the money to go into the dump; we are always anxious about making most of the time and money we have.

Therefore, detailed and thorough research regarding the planning of your inventory forecasting and storage should be done.

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1 Comment

  • Nauman


    Amazing Content

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