As we enter into Quarter 2 of 2024, D2C brands should invest their time in learning on how to accurately forecast inventory using the right tools, metrics and analytics especially for Black Friday & Cyber Monday and the big sales seasons that usually happen in the Q4 of the year as per Shopify.
An incorrect forecast for your stock leads to an overall loss in business revenue as brands either understock (losing out on new sales) or over-stock (they lock in their cash for unused inventory).
Quickly Setting Up Forecasting Basics
To accurately project your inventory numbers it is important to have metrics and information at hand - Sales data, market trends, and upcoming marketing campaigns and any major events in the quarter. Here is a primer on the 4 types of forecasting.
- Sales data can easily be taken from existing eCommerce store or listing: Shopify, WooCommerce or BigCommerce or Amazon
- For market trends, people can use Google Trends or Exploding Topics
- You can refer to this calendar from Privy to get information about upcoming major events in the year
The foundation of accurate inventory forecasting lies in the quality of data.
Inventory Forecasting Within Excel
Even in 2024, Excel remains a powerful tool for startups and small businesses looking for inventory forecasting templates without the immediate need for specialised software. Here is Reddit thread with discussion on how you can automate inventory management for Shopify & Ebay using excel.
By setting up a spreadsheet with historical sales data, seasonality indexes, and growth trends, businesses can create basic forecast models. Excel's functions, such as FORECAST.LINEAR, can help predict future demand based on past data.
However, it's very important to recognize Excel's limitations, especially as your business grows and data becomes more complex.
- Excel doesn’t generate insights from the data on which business can take action.
- Excel doesn’t share alerts in real time based on the forecasted data
Using Technology for Forecasting in 2024
The role of technology in inventory forecasting has evolved significantly, with AI and machine learning leading the charge.
At Prediko, our proprietary AI has been trained on 25 million+ SKUs from 15+ industries to accurately predict demand for eCommerce stores. Our model has been trained on almost all types of inventory situations that a brand faces.
That’s why we are able to predict demand with very high accuracy. One of the reasons why brands prefer us over Inventory Planner as one of their alternatives
A leading healthy living and self-care brand based in the UK, Healf, reported a tremendous decrease in their out-of-stock incidents after they started using Prediko for their store.
They adopted our inventory management solution in early 2024, targeting to optimise their inventory for the entire year.
On top of that, we also provide actionable insights. Let’s say if our AI is able to see that you are running out of stock for this particular product, then Prediko’s AI generates that insight for you within our app
Implementing a Forecasting Model
Choosing the right forecasting model is key to accuracy. That’s why forecasting can become a slippery ground when performing inside an excel sheet. And it’s not a one-time effort but a continuous pursuit.
Prediko’s AI takes care of all the heavy work. We just need to connect to your Shopify store (our sync works in 1-click).
Based on your historical sales data, we are able to generate a forecast for the next 12 months. If you have any upcoming marketing campaigns or events lined up, then we can easily factor the impact of those events or campaigns for your eCommerce inventory forecasting.
This iterative process ensures your forecasting strategy remains relevant and accurate. For subscription-first brands it's important to invest in the right inventory forecasting technique to get rid of excess stock.
Importance of Collaboration between teams for an accurate forecast.
Effective inventory forecasting in 2024 also depends upon a seamless cross collaboration across departments- Sales, marketing, and supply chain teams.
They must be working closely to share data, upcoming promotions, and changes in market strategy that could affect demand.
Obsidian Piercing, one of our customers, were able to collaborate and forecast more accurately using Prediko. This helped the business grow their best sellers revenue by 200%
Inventory Forecasting Tools and Software
The landscape of inventory forecasting tools has vastly increased, catering to businesses of all sizes. From cloud-based solutions like Prediko that integrate directly with your Shopify store platform to other tools like Cogsy & Inventory Planner.
Each tool comes with its own pros and cons. These tools not only help with inventory forecasting but also help with other areas of inventory management and operations. That’s why we suggest all businesses and brands ditch excel and sheet and go for an inventory forecasting software or app for their eCommerce business
Uncomplicating forecasting and generating actionables
The issue with the current way of forecasting is that it is not associated with any kind of insights or actionables for D2C operators to work on. That's why Prediko not only helps with the forecasting bit but also generates actionables for D2C brands. We call it insights - Brands get a set of actions that they can work on for an improved inventory efficiency.
