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Worst Practices in Inventory Forecasting

Feb 16

In spite of the fact that small businesses tend to have a smaller inventory than large organizations, they still face challenges in accurately forecasting inventory. Automated solutions and new technologies can improve the sales and inventory forecasting of small businesses. Using the best technology is pointless if your inventory forecasting practices are inadequate. 

In this blog post, we will discuss how sellers can avoid losses with amazon inventory system and preserve their capital by avoiding bad inventory forecasting practices. Let's begin. 

If you are looking for inventory forecasting software to improve your forecasting accuracy, be sure to check Inventooly. 

Five things you should not do when forecasting inventory

Ineffective sales forecasting and inventory management

Forecasting sales for inventory purposes is extremely complex and should not be handled by guesswork, assumptions, or manual calculations that can lead to errors. In order for a small business to produce accurate forecasts, inventory control and planning software is the simplest and most effective solution. When integrated with existing inventory and sales information, sales forecasting tools can create reliable predictions. Tools like the Amazon inventory management system can be very effective in this regard. 

Making forecasts based on expectations

Bad inventory forecasts are often the result of unrealistic accuracy expectations. It is possible to solve these problems with a sales forecasting, planning, and control system based on data and guided by automation. The accuracy of sales forecasts could be off the mark regularly without such a system.

Excessive reliance on inventory forecasting

Any business can benefit from the use of inventory forecasting, but too much reliance can be bad. A continuous source of woe for businesses is the lack of balance between demand and supply forecasts. Managing a small business's inventory effectively and maintaining optimal stock levels can be achieved with the help of a sales forecasting inventory tool. The accuracy of inventory tracking and the insights provided by business intelligence, for example, are critical to sales forecasting's effectiveness.

Leaving automated forecasts unreviewed

Nike, for example, has lost millions of dollars due to poor forecast reviews by its management. It is inventory and sales forecasts that enable owners and managers of businesses to make informed decisions. Taken out of context, this analysis can lead to devastating mistakes if seasonality and past inventory performance are not taken into account. Additionally, the inventory team may not be able to make the most effective decisions based on available forecasts since they do not have as much data as the management team.

Keeping inaccurate sales and inventory records

A small business is able to forecast sales and inventory accurately only if it has accurate sales and inventory data. Inventory control and management become much more difficult when the forecasting system itself is inaccurate, but if the data is as well. A management assessment is still necessary even when the organization has an automated inventory system in place, looking for gaps, errors, and other problems.

Here are four things to avoid when forecasting inventory

  • Using sales data to forecast inventory

The information on sales, which is typically limited to the products sold, cannot be used to determine inventory. In many cases, inventory management is informed by sales data, which can be frustrating since the level of stock drives sales rather than the other way around. Proper inventory management will lead to more sales and profit, however. Data derived from sales data alone cannot be used to support inventory management, which is a completely different field.

  • Predicting future stock levels by using historical sales data

If only historical sales data is considered, poor inventory forecasts are a consequence. In addition to shelf life and current inventory levels, there are many other factors that need to be taken into consideration when planning inventory, such as moving average cost of stock and moving average life of the stock. Inaccurate safety stock levels and calculations can result in your business missing sales, over-ordering, and stock becoming obsolete due to using the wrong type of data.

  • Managing and forecasting inventory with Excel

Using spreadsheets for inventory management is a bad business practice. Business growth is inhibited by this and certainly does not factor in what makes you a successful, growing company. Excel spreadsheets are labor-intensive in addition to being prone to human errors, which is why inventory levels are inaccurate.

  • Outdated business systems

Businesses of the future will be reliant on cloud computing. Historically, businesses used a server or computer in their building for running the applications. Using cloud computing, people have the ability to access every piece of information irrespective of their location. Cloud computing is useful for inventory management for a wide range of reasons.

A company needs to break these bad inventory management habits in order to remain competitive in today's market. The benefit of good inventory management is that whenever a sale is made, you will have stock to close it. Also, you will know what you have in stock and don't have in stock, helping you manage customer expectations. You will, therefore, be able to enhance the reputation of your brand among your clients. Customers will feel confident buying from you if you manage your inventory effectively. For your business to grow in the future, you must break these bad habits now.


To avoid the ramifications of adversely affecting your profits, an improved forecasting model should be a priority for every business. Stock-outs are likely to occur if the warehouse doesn't combine a forecast engine with a check process that ensures the forecast is accurate. If you avoid the practices mentioned in this article, you'll be able to get better results sooner or later.  

If you are a new seller on Amazon or any other E-commerce platform and looking for inventory management software, be sure to check Inventooly. It is the ideal Amazon inventory management system that covers all the requirements that a new seller is looking for.