Forecasting Customer Demand During Uncertain Times

We’re here to help SMBs during these uncertain times with the outbreak of COVID-19. Let us know what questions you have about managing inventory, forecasting customer demand, or ordering from suppliers. Cash flow is always top of mind and never more than now. Here are some tips.

  1. Reevaluate your forecasting method. If you normally reference two years of sales history to calculate the sales velocity of an item, it’s worth looking at a much shorter time period. Daily habits are changing for most consumers.
    Tip: For Inventory Planner users, this means changing to the ‘Last Sales’ forecasting method.
  2. Keep in mind when using a short sales history calculating the forecast, this can be very volatile. Each day’s sales will have a large effect on the calculation.
  3. As always, keep in mind when you’ve been in stock and out of stock. When possible calculate the sales velocity only using in stock days. This will make a huge difference in your forecasted demand if you’ve had stockouts. Read more here about how stockouts affect a forecast. The goal: How much do customers want when this item is available?
  4. If your revenue is dropping and cash flow is tight, prioritize your ordering/replenishment needs. What items have the highest ROI? Metrics to watch: forecast lost profit, replenishment profit, and replenishment retail. Here’s more detail about replenishment metrics to watch and how to calculate them.
  5. Another option: ABC Analysis. This identifies what contributes the most to your profits. The top 80% of revenue comes from A Class, the next 15% from B Class, and the final 5% from C Class. Here’s how to calculate your ABC Analysis.
  6. If you stock multiple warehouses or locations, consider the needs of each one, not just your company’s aggregated inventory demand. Each location has its own personality – different things sell at different rates in each location. Here is more information about forecasting for multiple warehouses or locations.
  7. Consider reducing your Days of Stock (AKA ideal stock cover). Inventory sitting on your warehouse shelves is money you can’t use elsewhere in your business. Especially while things are changing quickly, focus on small orders to vendors made frequently.
  8. Talk to your suppliers to see if they can lower minimum order quantities. Vendors are likely struggling too and a small order is better than no order (not the case 100% of the time, but worth having the conversation).
  9. Check with suppliers to see if lead times have changed. Suppliers in many countries may be facing labor shortages or dealing with other limits on production. (While checking in, be sure to ask how they’re coping with the outbreak.)

Let us know what other questions you have. We’ll be glad to help. Stay safe!