To avoid running out of stock of the products you sell, it's important to use inventory forecasting when building an inventory control strategy. Learn everything about inventory forecasting from industry veterans

1. INVENTORY
FORECASTING
For small business
(Wholesalers, Distributors,
eCommerce Sellers)

2. You must surely know the story of
Goldilocks and the Three Bears?

3. Wait

4. What has this got to do with
inventory forecasting?

5. The Goldilocks Principle of having
something that is not too hot and not
too cold has been used for everything
from the search for habitable Earth-like
planets to inventory management, and
of course, the perfect porridge
temperature

6. 1
2
Check that your inventory turnover is
within industry benchmarks
Use the popular Reorder Point formula
to get a reliable reorder point for your
goods

8. Are You Selling Goods
As Fast As They Are
Stocked?

9. What exactly is
INVENTORY TURNOVER?

10. Simply put, inventory turnover is how
fast you sell your inventory and the
need to replenish it

11. Sales ÷ Inventory
Measured over a period of one year

12. Higher Isn’t Necessarily
Better

13. A high number means that you’re not
stocking enough quantity of an item

14. To fix this, you need to raise your
inventory levels and lower your
turnover so that you don’t miss out on
any sales

15. How Do I Determine
My Optimal Reorder
Point?

16. A reorder point is the level of inventory
that triggers an action to replenish
stock

17. Reorder Point = Lead Time
Demand + Safety Stock
A popular reorder point formula is as follows

18. What Is Lead Time
Demand?

19. Lead Time Demand = Lead Time x
Average Daily Sales
Expressed as a formula

20. Lead time is the time it takes from the
issue of a purchase order to your
supplier to the time it arrives in your
warehouse

21. What Is Safety Stock?

22. Safety stock is not the stuff that you
purchase in the event of a cataclastic
disaster

23. Safety Stock = 1.65 x Square Root
of Lead Time Demand
Use this simple one that should suit most
small and medium-sized businesses

24. Let’s Summarise All This

25. Hence lead time
demand = 8 x 30 =
240 teddy bears
Hence, your reorder
point would be 240
+ 10 = 250
Lead time. It takes 30 days to receive a new batch of
limited edition teddy bears from the factory
Average daily sales. You sell an average of 8 teddy
bears a day at your store.
Safety stock. They come in a compact, stackable box.
So you like to keep 10 teddy bears as a buffer in your
secret storeroom
1
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3
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26. Finally, use an intelligent, cloud-based
inventory management system liked
EMERGE App
Average daily sales
Lead time for purchases
Inventory levels for your products

27. READ MORE
https://emergeapp.net/inventory-
reports/inventory-forecasting/