Inventory forecasting

You have now seen some examples of inventory calculations. In some way, the measures describe a static view of inventory: the quantities at a specific point in time, and the differences compared to a fixed inventory target level. In reality, inventory is constantly in flux: products are shipped from our warehouses, and new products come in from manufacturing. It is therefore more interesting to take turnover speed into account when we analyze inventory. And as the real business value comes from balancing our inventory levels as exactly as possible with our sales, we want to have some way of looking into the future of our inventory. In other words, what we want is an inventory forecast.

Two types of forecast

There are, of course, many ways to get a prediction of the future state of inventory. We will cover two options here: first, using a sales forecast that is provided by salespeople, and second, extrapolating changes in the inventory that have occurred...