Thorough Sales Forecasting and Inventory Management 

Sales forecasting

Forecasting sales and inventory management are two components of demand management because between forecasting sales and inventory management there is a direct relationship.

Forecasting is needed to make decisions about resource allocation. Accurate forecasts drive better resource allocation and, as a result, help to improve financial performance by decreasing the amount of inventory that a company must carry. Forecasting future sales by using past sales data allows companies to define the inventory level (for each item) they should support in the storage to satisfy customers' needs. Therefore, forecast accuracy is one of the keys aspects enabling the company's growth and success.

Along with forecasting, inventory management is a comprehensive and very important process that influences the financial situation of the company and the business whole. Moreover, inventory management is the most important arm in the supply chain because of its overall effect on company profitability.


It is important to understand how to:


Thorough forecasting helps to support the right inventory level, perform successful business
  • perform a calculation of the cost of inventory carrying;
  • reduce inventory while maintaining or even increasing customer service levels; 
  • identify opportunities that allow making inventory more productive; 
  • manage differently the inventory objectives that vary among goods with different demand patterns such as life cycle, seasonal, stable, and other;
  • use the inventory metrics to measure and support inventory performance; 
  • increase the returns on assets and returns on investments.

Businesses are in a continual state of motion which paces has accelerated in recent years. Today, forecasting sales and inventory management are a foundation upon which companies plan their business activity regarding the market and revenue projections.

Do you want the inventory costs to have a positive financial impact on your company?

The forecasting process's accuracy can cardinally influence your business profitability in a good sense. Predicting future demand is a critical element regarding sales assumptions, costs, and profits. At the same time, predicting future sales is the starting point of business planning, including defining the needed inventory level and purchasing.

inventory forecasting process

Inventory forecasting accuracy can be considered from:

  • two points of view: 
    • Quantitative bases on historical data of the past sales and predictions future demand for products. 
    • Qualitative bases on the stock review and market, economic, and potential demand. 
  • two points of the term: 
    • Long-term for making major strategic and planning decisions. 
    • Short-term such as seasonal demand or other.

To know what level of inventory should be in stock, you need to start with the forecast of sales for the coming one, three, six, or twelve months based on past seasonality and velocity of product sales.

Take into consideration:

  • Average sales – over the past 30 days. 
  • Sales velocity – the rate of sales if inventory was fully stocked (omitting stockouts). 
  • Seasonality – informs if past sales should be taken into account only for the most recent months or the last year (12 months). 
  • Sales trends – show whether demand is stable or growing in recent months.
Replenishment – an additional volume of stock needed to cover sales – takes into account:
  • Current stock levels – inventory that is already in stock; additional products that will be needed. 
  • Lead time from vendors – the time from purchasing until products are received into inventory. 
  • Stock regarding orders – products that are already ordered from suppliers and are scheduled to be delivered during the considered period.


Prism Visual Software, Inc. has developed an inventory software system that includes the ServQuest™ desktop package and MiniMate™ mobile application. Our inventory software solution helps companies to perform:

  • Inventory control by tracking stock movements and inventory activities. 
  • Inventory optimization by anticipating demand and receiving reorder alerts timely. 
  • Inventory forecasting with the help of using historical inventory and stock data. 
  • Inventory management by means of using powerful features and functionalities provided by ServQuest™ desktop package and MiniMate™ mobile app.
ServQuest™ desktop package and MiniMate™ mobile application