Forecasting is one of the core features of Inventory Planner. Forecasted sales drive your recommendations for Replenishment.

Summary

  • Forecasting Methods

  • Account-Wide Forecasting Settings

  • Custom Forecast Settings (by Variant)

  • The "Use Stockouts History" Setting

Forecasting Methods

Forecast settings can set based on multiple forecast methodologies:

  • Recent Sales and Trends

  • Last Sales

  • Seasonal

Recent Sales and Trends

This method uses recent sales and stockouts during the Sales Period for Forecast when generating a forecast. Inventory Planner calculates sales velocity and trend based customer orders placed during this time frame. 

Note: If the first sale of the variant occurs during the reporting period, then the sales velocity calculation starts with the first sale date by default. Contact the Inventory Planner team if you would like the 'created at' date used instead of the 'first sold at' date.

The Sales Period for Forecast and Trend can be adjusted by Variant by clicking the "i" icon under the 'Details' column, clicking the 'Forecast Settings' tab, and enabling 'Use Custom Forecasting Settings'.

Last Sales

This forecasting method is best for non-seasonal products. It is based on the average sales for the last "X" number of days, where you set the number of days. 

If the setting is enabled to "Use Stockouts History," the forecast will only look at periods when the product had available stock to calculate the sales velocity. Here is an example of how the algorithm works if "15" is entered for last "X" days:

1. Look at sales and stock over the last 15 days.

2. If the product went out of stock during the last 15 days, we look at the past 15 days when there was available stock to calculate the sales velocity. Note: sales during stockout periods are ignored.

3. If the product had no stock in the last 15 days, we use the last sale date when it was available, then look at sales and stock from the prior 15 days to calculate the sales velocity.

  • New accounts: Inventory Planner tracks stock history starting with the day you connect your platform. Since we cannot see past stock, we will look at the 'Last Sold At' date then add sales from the prior 15 days to calculate sales velocity / number of days with sales orders in the 15-day period. Note: if the number of days with sales in the period is <= 3 we'll divide over 15 days by default.

  • Exclusions: the following are ignored using this forecast method;
    - Manually inputted stockouts.
    - Manually adjusted sales history.
    - Wholesale orders.
    - Trends.

Seasonal

This forecast method refers to the same months in prior years as the sales reference period. This is beneficial for holiday and seasonally driven items with 12+ months of history. Sales Velocity is not a consideration in this case. Trend is applied by evaluating sales over the last 12 months vs. the prior 12 months.

For example, sales from January 2018 and January 2019 impact the forecasted needs for January 2020. If today is December 31, 2019 - the trend will be based on sales between January - December 2019 vs. January - December 2018.

When an item has less than 12 months of sales history, the seasonal forecasting method computes a seasonal forecast at the Category level, then distributes forecasted sales to the Variants.

For items with less than 12 months of sales history, the last 2 months of sales are used to determine each variant's contribution to the total unit sales of the category. Non-replenishable and non-tracked products are excluded from this distribution.

For example, if Variant A contributed 5% of the sales units to Category Z during the period, then Variant A will receive 5% of the category's forecasted sales in upcoming months.

ACCOUNT-WIDE FORECAST SETTINGS

The default Sales Period for Forecast is set for all items at the top right of the Replenishment screen. Customer orders placed during this time will be used to calculate the forecasted demand.

For non-seasonal forecasts, Inventory Planner calculates the sales velocity (average sales per day excluding the number of days out-of-stock) during this time frame, and the trend based on the input for 'Trend Months' under Account Settings

Note: If the first sale of the variant occurs during the reporting period, then the sales velocity calculation starts with the first sale date by default. Contact the Inventory Planner team if you would like the 'created at' date used instead of the 'first sold at' date.

For seasonal forecasts, Inventory Planner refers to the same months in prior years as the sales reference period. This is beneficial for holiday and seasonally driven items.

Account-wide forecast settings can be found by going to Account > Settings:

> Forecast.  
 

  • Use Stockouts History: Inventory Planner automatically detects when a product is out of stock starting from the moment you connect your store to Inventory Planner. This data helps to estimate the demand correctly.

    For example, if you sell on average 10 units of Variant A per month and the product is out of stock for 1/2 of a month - the real demand for it is 20 units. Without taking stockouts into account, the forecasted demand could be too low.

    By default, your account is set to take into account stockouts. If your store allows overselling (continuing to sell an item even when it is out of stock), then you should change this setting to disregard out-of-stock information.

  • Default Forecasting Method: This account-wide setting will be the forecasting method used by all items in your account unless a custom forecast setting is used (scroll down to read about this in the section Custom Forecast Settings).

  • Apply seasonal increase for non-seasonal products for Black Friday and Christmas: When this option is set, Inventory Planners will take in to account Holiday Sales seasons (Including Black Friday and Cyber Monday), for items that are non-seasonal.

    We check the previous year sales in the months of November and December and if increases are detected, these are automatically applied to your future forecast for these times.

    Read more about this, here: Forecasting for holiday season

  • Bundles are Assemblies by default: This setting considers all bundles to be produced bundles. If all bundles in the account are assembled prior to fulfillment (that is, the stock of bundles is separate from stock for each of its components) then this setting should be enabled. If bundles are assembled at the time of fulfillment, then do not check this box. Learn more about bundles and packs here.

  • Default Replenishment: This field sets default replenishment recommendations for items with zero stock and no sales history. Note that this only applies to items with zero stock and no sales history. This is intended to be used for newly listed items before receiving your initial order of inventory. Once an item either has stock or sales history, the default replenishment will not apply.

  • Default Min Stock (Safety Stock): The number of units added to the calculated replenishment recommendation. For example, if Inventory Planner calculates 5 units are needed of an item and the Default Min Stock is set to 10 units, the new replenishment recommendation will be 15 units.

    Rather than using Min Stock, we strongly recommend adding to the Days of Stock setting to produce better recommendations and stock control. Adding to Days of Stock ensures that the buffer amount of stock is relative to the sales velocity for each item. Read more about why it is better to use Days of Stock rather than Min Stock here.

  • Excluded Sales: For non-seasonal forecasting methods (Recent Sales & Trends and Last Sales), it can be helpful to exclude certain periods of unusual sales from the forecast calculation. For example, by excluding Black Friday and Cyber Monday sales, the forecast the following weeks and months will not be overstated following a spike in sales.

CUSTOM FORECAST SETTINGS

There are two methods for customizing Forecast Settings by Variant:

Method #1: Select Catalog > Forecast Settings

To customize Forecast Settings by Variants, you can select Catalog > Forecast Settings then enable the "Custom Forecast Settings" checkbox next to any items.

Method #2: Set Custom Forecast Settings in Bulk

Set Custom Forecast Settings in Bulk by selecting multiple items in the Replenishment section > Bulk Actions > Set Forecast Settings, or a single Variant by selecting the Details "i" icon next to any variant in the Replenishment section > then select the Forecast Settings tab.

Enable the button to "Use Custom Forecasting Settings", then adjust settings as desired for the Variant(s).

USE STOCKOUTS HISTORY

Inventory Planner automatically detects when a product is out of stock starting from the moment you connect your store to Inventory Planner. This data helps to estimate the demand correctly.

For example, if you sell on average 10 units of Variant A per month and the product is out of stock for 1/2 of a month - the real demand for it is 20 units. Without taking stockouts into account, the forecasted demand could be too low.

Configure the setting using the same steps as above for setting Custom Forecast Settings. Enable this setting to adjust the forecast using past out-of-stock information. Enabling this setting assumes that backorders are not accepted.

If your store allows overselling (continuing to sell an item even when it is out of stock), disable this setting. Disabling the setting ignores past stockouts, and also ensures that forecasts consider backorders if/when stocked out during the lead time.

Past Stockouts can be inputted manually under the 'Edit Forecast' tab;

Or by selecting the Details "i" icon > Replenishment & Forecast.

Past Stockouts can also be imported through a CSV. More information on adjusting stockouts can be found here.

Note: If you need to make additional changes to your forecast, read our article about the Edit Forecast functionality.

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