Truth in Forecasting—Practical Advice at Year’s Start
Due to the Covid-19 pandemic, you may not have met many of your Amazon business goals in 2021, another year with many of the same challenges as 2020. However, there is still time to return to the right track and prepare for better forecasting in 2022.
The purpose of this article is to provide you with some helpful inventory forecasting tips to kick off the new year. Amazon sales forecasting is not an easy task without the Amazon warehouse system. In order to maintain an edge over your competitors, you must utilize the latest technology and develop new strategies. Check Inventooly if you require accurate forecasting and inventory management for your inventories.
Inventory forecasting methods
The tips will make more sense if we understand how most businesses forecast their financial position. Forecasting is largely determined by quantitative and qualitative methods, both of which are preferred by most experts who offer amazon warehouse management services. For the sake of newbies and business owners, we will briefly explain these if you are in the retailer business.
- Forecasting quantitative inventory levels
Quantitative forecasts of inventory are derived mainly from the sales data you receive from your POS system. Creating more accurate predictions is made easier as you track sales data over time. By looking at a few years' worths of sales data, it is possible to determine seasonal trends.
Consumer demand could only be predicted by quantitative inventory forecasting before COVID, regardless of whether it was seasonal. COVID-19 has substantially changed the buying power and what consumers buy over the years.
Thus, past sales do not provide an accurate picture of future sales. This applies in particular to short-term sales. Yet, we should not ignore them. It remains useful in spite of its limitations. If volumes have increased steadily over the last 6 months, a product or category should be considered for volume expansion.
- Forecasting qualitative inventory levels
Data from the past is less relevant in qualitative inventory forecasting. There are times when qualitative forecasting may be the only option when accessing a lot of hard data is difficult. It is also important to use qualitative information when external events have influenced how consumers buy (such as COVID).
Qualitative research relies on primary and secondary sources, market trends, and expert opinions rather than sales statistics.
Let's say you just started collecting sales data three months ago. If you lack the sales information to make an educated prediction, you can make a quantitative forecast. It can also help you deal with shifts in consumer behavior in addition to abrupt changes in the market. On the basis of historical data, these factors may be difficult to predict. For example, social distance may influence consumer behavior.
Here is a guide to forecasting your inventory
Analyzing sales data is just one aspect of inventory forecasting. If you want to make your inventory forecast as accurate as possible during unpredictable times, follow these practices.
- Discover the needs and wants of your customers
By directly asking your customers what brands and products they would like you to carry, you can connect directly with them. When customers feel like they're a part of a brand, they tend to buy more from them. Considering their feedback and suggestions when selecting products can make all the difference.
The following steps can be followed to ask customers to complete a survey:
- Step 1. You will ask your customers anonymously to rate three of the products that you are currently selling. There is a choice between they are extremely likely to purchase, likely to purchase on sale, and unlikely to purchase. A form question allowing them to suggest new products would also be helpful.
- Step 2. The second survey is crafted based on the results of the first survey. In this survey, customers are asked whether they agree or disagree with previous survey results. It is prudent to carry out the previous survey if several people propose similar types of products. If so, add at least one and ask them to comment on it, offering them the choice of buying as you did in step 1.
- Step 3. You do a third survey based on the second's results. Similarly, if there is a clear consensus on which products to exclude from this survey, you can exclude them from the first survey as well.
- Decide when to place your reorders and stay on top of the forecast period
Can demand be forecast as far back as possible? Due to seasonality and as a result of changing needs, all SKUs will not have the same reorder point throughout the year. Especially true now that retailers are dealing with COVID-19's lasting effects on consumer behavior as well as social distancing.
Quantitative predictions based on recent sales, however, can be made on the basis of last year's sales data. You may want to keep your forecast period long if you're currently experiencing shifting demand and uncertainty. Nevertheless, it should not take too long that it distracts from your current economic situation or reality.
- Using software to forecast inventory
The ability to forecast inventory without relying solely on gut feeling makes it much easier. You can forecast inventory with Inventooly. In both POS and Analytics, Inventooly offers merchants the ability to access sales data. The inventory management capabilities of Inventooly are also useful along with forecasting. In addition to helping users manage inventory, it allows them to know 24/7 what is happening in the warehouses. You get the mentioned benefits with Inventooly.
- Strategize Procurement Management
- An easy way to manage orders
- Business insights of the highest quality
- Channels of sales centralized
- Notifications in real-time
Buying inventory based exclusively on your gut is a risky tactic, but this has been the case since the pandemic hit as well. Analyzing both qualitative and quantitative information will allow you to make the best decision when forecasting demand for particular SKUs. In the current economic climate, if you want to maximize profit and minimize your cost of goods sold (CoGS), there is no reason not to properly forecast your inventory.
If you still need more guidance on inventory management Amazon or forecasting Amazon inventory feel free to contact our experts at Inventooly. When forecasting the demand for certain SKUs, take both qualitative and quantitative information into account to be sure that you are making the best possible decisions.ts at Inventooly for more opinions.