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Getting started with forecasting
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Written by Sara Jaffer
Updated over 4 months ago

Inventory Planner Essentials helps you with demand planning by creating automatic forecasts which are updated daily, therefore minimizing stockouts and overstocks. You can then use your expertise to customize these forecasts and create a plan.

Taking time with forecasting is important as forecasted sales drive the purchase recommendations of when and how much to order.

How often should you forecast?

As Inventory Planner Essentials’ forecasting is dynamic and refreshed daily, you don’t need to tweak it every day to get timely purchase recommendations. Therefore, if you’re unsure on how often to forecast we recommend a monthly check-in.

Pay particular attention to the variants in your Bestsellers view, as they should be making you the most revenue.

Forecasting in three steps

Step 1: Learn from your sales history.

After a variant is added to your Shopify location, it will sync to Inventory Planner Essentials, which will automatically create a forecast. The forecast is then updated daily, based on the variant’s sales and inventory history to that date. Your data always stays fresh, with no action needed from you.

Inventory Planner Essentials uses a simple, understandable calculation to work out an average rate of sales, or velocity, based on sales history as the best data-driven evidence for future demand.

This velocity is then forecast to continue for the next 18 months. Although some months will have more sales than others in the future, that average number used for the velocity should be correct for most variants over longer periods of time. Learn more about the forecasting method here.

All new variants look at up to a year’s history by default, smoothing out fluctuations in the sales pattern. You can change this period if you want a more reactive forecast.

Step 2: Adjust to fit your future plans.

Inventory Planner Essentials automates forecasting based on past sales history, but there’s more to demand planning than just looking at the past. Demand planning should also consider your business decisions for the future, such as marketing and promotional plans, as well as your expertise about your specific market and customers.

You can adjust the forecast for each month with a percentage increase or decrease. For example, if you’re planning to drive 20% more sales during a promotion one month, you can easily apply that to your forecast – and since the adjustment is a percentage, you don’t need to keep changing them if the overall sales of your variants are changing too. No more fixed-number plans that quickly go out of date when the market changes. Learn more about making adjustments for specific scenarios here.

How to efficiently adjust plans

You rarely have time to create and keep updating a custom demand plan for every product in your catalog, so Inventory Planner Essentials is designed to help you work efficiently with bulk adjustments.

You can make adjustments to several variants at once by applying filters, meaning you don’t have to create and keep updating custom demand plans for every product in your catalog. You can also use views to focus on critical variants, such as new launches and bestsellers. Learn more about views here.

Step 3: Turn forecasts into purchasing decisions.

Inventory Planner Essentials uses your forecast to make dynamic purchase recommendations of when and how much to order, rather than relying on a fixed minimum inventory level.

You choose how long you want to hold stock for and provide your vendors’ lead time, and Inventory Planner Essentials uses your month-by-month forecast to see how long your current inventory will last and how much you need in your next order. 30 days’ of inventory in November might look very different to 30 days’ of inventory in March if the variant sells well over Black Friday.

When you create a great demand plan, your purchase recommendations will help you avoid under-ordering ahead of a big promotion or over-ordering and having cash tied up in slow-moving stock.

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