Jan Bednar, CEO and founder of ShipMonk

Forecasters have it rough. Consider how much the local weather person or meteorologist affects our daily lives. If an unexpected storm system enters the area and rains out a picnic, outdoor gathering, or other plans, we give those forecasters all the shade, so to speak.

Ecommerce forecasters don’t face nearly the same amount of scorn. Ecommerce forecasting falls into three buckets—inventory, orders, and receiving—but there is a process behind it. That forecasting requires accounting for how much stock is available to fulfill an order. It helps the bottom line by projecting how much inventory multiple warehouses need to reduce shipping costs and time. It also improves cash flow, which is something everyone can get behind.

Those elements combine to shine a light on predicting what’s needed to fulfill the current slate of orders while forecasting demand for future purchases. If you whiff on any of those predictions, however, your ecommerce business’ prospects could look anything but sunny.

Knowing what’s ahead

Spotty weather forecasts can interfere with anyone’s best-laid plans. That Saturday afternoon at the pool, park, or ballgame gets thrown into question if the forecast is either read or conveyed the wrong way.

Ecommerce forecasting works the same way, though with less chance of being doused in sweat or rainfall. Inventory dictates whatever predictions an ecommerce provider makes; therefore, it’s an invaluable aspect of forecasting and overseeing a digital business. If you don’t have the goods to deliver what you promised, that’s bad news for your business and can build negative word of mouth.

Faulty inventory management can cause companies to mismanage their resources. Monitoring what you have in stock now determines what you’ll need in the future. So, it would be best if you didn’t disregard the trickle-down effect. On top of that, monitoring your inventory can also help you wipe out dead SKUs.

There’s also the matter of collecting inbound inventory. By accurately predicting what you need and staying on top of your next re-up, you can have the manual resources to complete orders and keep your supply chain and operations moving.

In short, getting ecommerce predictions right does matter. Without an accurate forecast, your parade is rained on pretty quickly.

Getting the forecast right the first time

Your local weather person has a pretty wide margin of error. In ecommerce, however, you’re only as good as your next successful transaction. To make sure you get your predictions right as often as possible, here are three ways to forecast your business needs accurately:

1. Stay out in front: Most companies wait for stocks to empty to order more supplies, which doesn’t work well during times of high demand.  To avoid this problem, establish a reorder point that automatically triggers a restock. Calculate your lead-time demand and safety-stock in terms of days, coming up with a firm number for each item. Adjust that threshold as needed but use it as a benchmark for staying on top of things.
2. Experiment a little: Forecasting comes in all shapes and sizes. Try out a few different methods to see which one works best for you. Naïve forecasting, for instance, says companies that regularly offload 100 items each month should have 100 available the following month. This doesn’t include external factors—which is where demand forecasting comes in—or use past data and predictive formulas to anticipate future needs. Still, finding your best approach will help keep you off your heels.
3. Don’t hoard: Less is more when it comes to managing inventory. Keep your supply consolidated to one spot until it’s time to expand and eliminate any excess materials. If an SKU isn’t moving or is hampering production, drop it. That SKU might be taking up space, you’ll need to store new order essentials. That seemingly minor issue can have a domino effect on other production elements.

Your digital business might be more successful than your local meteorologist when it comes to making predictions, but you shouldn’t rest on that likelihood. Incorporate a reliable forecasting process into your business model, and you’re sure to enjoy a bright future.

 ShipMonk is an ecommerce fulfillment and shipping company.