Forecasting what will sell, and turning that into purchase orders you can fund.

Forecasting is the easy half. The hard half is converting a forecast into purchase orders that respect supplier minimums, lead times, and the cash you have. Both halves are here, and so is the join between them.

18 questions answered

• What is demand forecasting?→

  Demand forecasting is estimating how many units of each SKU will sell over a future period, so you can buy or make the right quantity. It combines sales history, seasonality, trend, and known events such as promotions or a new retail door. The output is a per-SKU quantity by period, which is what a purchase plan needs.

• What is demand sensing and how is it different from forecasting?→

  Demand sensing uses near-term signals — recent point-of-sale data, current order rates, retailer inventory positions — to adjust a forecast over the next days or weeks. Classical forecasting works from historical patterns over months. Sensing corrects for what is happening now; forecasting sets the baseline it corrects.

• How accurate should a demand forecast be?→

  Accuracy targets depend on what you are forecasting. Aggregate forecasts at category level are routinely within 10%, while individual SKU-week forecasts on a long tail can be far worse and still be useful. Judge a forecast by whether its errors would have changed a buying decision, not by the percentage alone.

• How do I turn a forecast into a purchase order?→

  Take the forecast for the coverage period, subtract stock on hand and stock already on order, add safety stock, then round up to the supplier’s minimum order quantity and case pack. Check the result against available cash and the lead time, and place it far enough ahead that it lands before the reorder point is hit.

• What is open to buy?→

  Open to buy is the budget still available to spend on inventory for a period, after accounting for what is already on order and the stock you plan to hold at period end. It converts a merchandising plan into a spending limit, so buying decisions are bounded by the plan rather than by enthusiasm.

• How do I forecast a new product with no sales history?→

  Borrow a history. Find the closest existing product by price, category, and channel mix, use its launch curve as the baseline, and scale it by whatever differs — a bigger launch audience, fewer doors, a higher price. Then plan a short first order and a fast reorder instead of one confident large one.

• How do I forecast seasonal products?→

  Separate the seasonal shape from the underlying trend. Work out the index for each period from prior years — what share of annual volume falls in each week or month — then apply this year’s expected total to that shape. Adjust for calendar shifts, since holidays move and a week-numbered comparison can misalign them.

• How do I plan around long supplier lead times?→

  Push the decision point earlier and reduce what each decision commits. Order in more, smaller tranches with staggered arrival dates, negotiate a partial-release schedule against one purchase order, and hold safety stock sized to lead-time variability rather than to demand. Where possible, split volume across a second supplier with a shorter lead time.

• What is a minimum order quantity?→

  A minimum order quantity is the smallest amount a supplier will produce or ship in one order, set to cover their setup and handling cost. It can apply per SKU, per color or size, or across the whole order. It sets a floor on how little you can commit, regardless of what demand says you need.

• How do I know whether I can afford to fill a purchase order?→

  Compare the cash going out against the cash coming back, on dates rather than in totals. You pay for goods, freight, and duty on the supplier’s terms; the retailer pays you on theirs, often 30 to 90 days after delivery. A profitable order can still be unfundable if the gap between those two dates is wider than your runway.

• Should I forecast by SKU or by category?→

  Both, at different altitudes. Category forecasts are more accurate because errors on individual SKUs offset, and they are the right basis for budget and capacity planning. Purchase orders need SKU-level numbers, so forecast the category, then split it across SKUs using recent share of mix.

• How do promotions affect a forecast?→

  A promotion pulls demand forward as much as it creates it. Units sell during the discount window that would have sold later at full price, so the lift is followed by a trough. Forecasting the lift without the trough overstates the period total and leaves you holding stock bought for demand that already happened.

• What should a purchase order contain?→

  The supplier, the ship-to location, and the terms; then every line with SKU, description, quantity, unit cost, and required delivery date. Add the incoterm, the currency, the payment terms, and any packaging or labelling requirements. Anything left implicit becomes a discrepancy when the goods arrive.

• What is a case pack and how does it affect ordering?→

  A case pack is the fixed number of units in a shipping case. Orders are placed in whole cases, so the case size is the smallest increment you can buy or sell into wholesale. A twelve-unit case means a retailer wanting sixteen takes twelve or twenty-four.

• How far ahead should I plan inventory?→

  At least one full lead time plus the coverage period you intend to hold, which for imported goods usually means planning four to six months out. Seasonal ranges need a full annual cycle, since the buying decision for a peak is made before the previous peak has finished reporting.

• What are net terms?→

  Net terms are how long a buyer has to pay after invoicing. Net 30 means payment is due thirty days from the invoice date, and retail terms commonly run to net 60 or net 90. Terms may include an early-payment discount, written as 2/10 net 30 — two percent off if paid within ten days.

• How do I measure supplier reliability?→

  Track each purchase order against the date and quantity it promised: how often the supplier delivered in full, how many days early or late, and the spread of those results. The spread matters most, since consistent lateness can be planned around and erratic delivery cannot.

• What is the difference between forecasting and planning?→

  A forecast estimates what demand will be. A plan decides what you will do about it. The forecast is a number you do not control; the plan commits cash, capacity, and supplier slots, and it has to respect minimums, lead times, and budget that the forecast knows nothing about.

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