Inventory Forecasting 101: A Beginner's Guide

What Is Inventory Forecasting?

Inventory forecasting predicts how much product you'll sell in the future. Whether you're managing Shopify inventory or handling multi-channel operations, good forecasting helps you:

• Order the right amount from suppliers
• Avoid stockouts (lost sales)
• Avoid overstock (tied-up cash)
• Plan cash flow accurately

The Basic Formula

At its simplest, forecasting answers one question:

How much will I sell before my next order arrives?

To answer this, you need:

1. Sales velocity: How fast are you selling?
2. Lead time: How long until new stock arrives?
3. Safety stock: Buffer for unexpected demand

Reorder Quantity = (Daily Sales × Lead Time) + Safety Stock - Current Inventory

Step 1: Calculate Sales Velocity

Look at your recent sales history:

Last 30 days sold: 300 units
Daily average: 10 units/day

Consider trends:

• Is demand increasing or decreasing?
• Any seasonal patterns?
• Upcoming promotions?

Step 2: Know Your Lead Times

Lead time = time from order to ready-to-sell:

Supplier processing: 3 days
Shipping from China: 30 days
Customs + receiving: 7 days
Total lead time: 40 days

During this 40 days, you'll sell approximately:

10 units/day × 40 days = 400 units

Step 3: Calculate Safety Stock

Safety stock protects against:

• Demand spikes
• Shipping delays
• Supplier issues

A simple rule: keep 2 weeks of safety stock:

10 units/day × 14 days = 140 units

Step 4: Determine Reorder Point

Reorder when inventory hits:

Lead Time Demand + Safety Stock = Reorder Point
400 units + 140 units = 540 units

When you have 540 units, place your next order.

Step 5: Calculate Order Quantity

How much to order depends on:

• Reorder frequency: Monthly? Quarterly?
• Minimum order quantity: Supplier requirements
• Storage capacity: Warehouse limits
• Cash flow: Capital available

Seasonality Matters

E-commerce isn't flat year-round. Consider:

• Q4 spike: Holiday shopping surge
• Summer slowdown: Some products dip
• Promotional periods: Prime Day, Black Friday
• Category-specific: Swimwear, holiday decor, etc.

Adjust forecasts based on last year's patterns.

Manual vs. Automated Forecasting

Manual (Spreadsheets)

• Works for <50 SKUs
• Time-consuming
• Prone to errors
• No automatic alerts

Automated (ReplenishRadar)

• Handles hundreds of SKUs
• Updates automatically
• Factors in seasonality
• Alerts when to order

Ready to automate your forecasting? Try ReplenishRadar free for 14 days and see your first forecasts within an hour of connecting your store.

Getting Started

1. Gather data: Export last 12 months of sales by SKU
2. Calculate velocity: Average daily sales per product
3. List lead times: Know how long each supplier takes
4. Set reorder points: Use the formula above
5. Monitor and adjust: Forecasting improves with iteration

---

Skip the Spreadsheets

ReplenishRadar automates demand forecasting for Shopify and Amazon sellers. Connect your store, and we'll:

• Analyze your sales history automatically
• Detect seasonality and trends
• Alert you when it's time to reorder
• Generate purchase order suggestions

Start your free 14-day trial →

---

Related Reading:

• Safety Stock Calculation Guide
• Reorder Point Calculator
• Stockout Cost Calculator