The inventory forecasting blueprint for growing retailers 

Poor inventory forecasting shows up in one of two ways. Cash gets stuck in stock nobody’s buying. Or shelves sit empty while customers buy from someone else.

Both those problems get in the way of growth. That’s why good inventory forecasting is so important.

What is inventory forecasting?

Inventory forecasting uses data to work out how much stock you’ll need to meet future demand. It draws on historical sales, supplier lead times, seasonality, and planned marketing activity. The goal is to answer two questions. How much should you order? When should it arrive?

That’s different from demand forecasting, which predicts what customers will buy. Inventory forecasting goes a step further. It turns that prediction into an ordering plan: how much stock, and on what timeline. 

The goal is simple: get the right amount of product to the right place before customers want it.

Four inputs drive an accurate inventory forecast:

1. Historical sales data, to identify trends.
2. Supplier lead times, to account for restocking timelines.
3. Current inventory levels, to see what’s already in stock.
4. Marketing plans, to prepare for demand spikes a promotion or campaign will cause.

Common stock forecasting mistakes

A few habits can undermine forecasting:

• Relying only on historical data without adjusting for new trends.
• Ignoring real-time signals, like a sudden spike in traffic or a competitor’s stockout.
• Using spreadsheets for forecasting complex, multi-SKU, multi-location inventory.

Two ways to forecast inventory

Accurate forecasting uses two approaches: data analysis and human judgment.

Data-driven (quantitative) forecasting

This approach uses historical sales data, seasonality patterns, and tools like machine learning. It can predict demand down to the individual SKU. According to McKinsey, AI-driven forecasting can reduce forecasting errors by 20-50%. It can also cut lost sales from stockouts by up to 65%, compared with traditional methods. It works best for products with enough sales history for the patterns to be reliable.

Human judgment (qualitative) forecasting

Sometimes the data is thin. A new product launch. A volatile market. In these cases, numbers alone don’t tell the full story. Qualitative forecasting fills that gap with human input:

• Market research and focus groups.
• Input from sales and marketing teams who talk to customers directly.
• Broader market trends and shifts in consumer sentiment.

This matters most for things a spreadsheet can’t see coming. A sudden shift in the economy. A rival’s move that changes what customers want.

The strongest forecasts start with data. Then they adjust using human judgment where the data runs out.

What to look for in inventory forecasting software

Spreadsheets can work at a small scale. But manual forecasting breaks down fast as product count and order volume grow. Look for a tool that covers:

• SKU-level forecasting. Predicts demand for each product individually, including seasonal and newly launched items.
• Automated replenishment. Generates purchase recommendations so you’re not calculating reorder points by hand.
• Multi-location tracking. Shows inventory across stores, warehouses, and third-party logistics providers in one place.
• Open-to-buy budgeting. Caps how much you can spend on new stock, based on your sales plan. That keeps purchasing aligned with what you can sell.
• Integrations. Connects with your ecommerce platforms, ERP, and accounting tools. Stock data doesn’t have to be re-entered across systems.

A Linnworks partner: Inventory Planner by Sage

Inventory Planner integrates with Linnworks. It analyzes your sales trends, seasonality, and supplier lead times to generate buying recommendations: what to buy, how much to order, and when to restock. It also flags slow-moving items, helping you reduce excess inventory while keeping bestsellers in stock.

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Turn inventory turnover into cash flow

Every unit sitting in your warehouse is cash you can’t use elsewhere. Inventory turnover measures how often you sell through and replace your stock. It tells you whether that cash is moving or stuck.

To calculate your inventory turnover ratio, divide your cost of goods sold by the average value of your inventory.

Inventory turnover = cost of goods sold ÷ average inventory value

Average inventory value = (beginning inventory value + ending inventory value) ÷ 2

Your beginning and ending values could be taken from the first and last day of a month, quarter, or year, for example.

A higher inventory turnover ratio means your stock is moving efficiently. But if your ratio is too high, it could mean you’re not holding enough stock to fulfill orders.

Here are three ways to improve your ratio:

1. Use forecasts to catch slow movers early. Then run targeted promotions or markdowns to clear them before they become dead stock.
2. Categorize inventory by value and movement. Retailers often call this ABC analysis: A for high-value, fast-moving items, B for moderate, C for low-value, slow-moving. It helps you prioritize monitoring and replenishment where it matters most.
3. Shorten supplier lead times where you can. Shorter lead times let you hold less safety stock. That frees up cash that would otherwise sit in buffer inventory.

Where inventory forecasting is heading

• AI and machine learning are improving forecast accuracy. They catch demand shifts and patterns faster than manual analysis can.
• Predictive analytics can flag likely disruptions, like a shipping delay, before they hit your stock levels.
• More detailed customer data is making forecasts more precise, down to individual product assortments and marketing segments.

Inventory forecasting with Linnworks

Linnworks’ built-in forecasting uses your historical sales data to generate demand predictions, adjusting as current sales activity changes. And Inventory Planner by Sage connects directly to your Linnworks data. It adds SKU-level forecasting, automated buying recommendations, and open-to-buy budgeting on top of what’s built in.

Request a demo to see how you can get accurate inventory forecasting with Linnworks.

Inventory forecasting FAQs