You can decrease cost of goods sold and increase profit margins with the Forecasted demand and Suggested reorder quantity measures. These, when added to the Replenishment report, can help you plan your required ordering of non-seasonal items.

You can use these measures to:

• Access accurate suggested order amounts, accounting for out-of-stock periods.
• Minimize manual tasks by accessing these details in the platform, rather than exporting inventory and sales reports to determine replenishment. 
• Avoid under- or over-stocking products.

These features are especially helpful if you reorder existing catalog items from suppliers throughout a year or season, rather than purchase new items for an upcoming season or year.  

The use of this forecasting tool is at the user’s own risk. Lightspeed cannot guarantee the accuracy and reliability of the forecasts generated. Actual results may differ. The tool is provided for informational purposes only and should not be considered as financial, investment, or legal advice. Users are encouraged to exercise caution before making business decisions based on the tool’s output.

To access the forecasting columns, navigate to Reporting > Inventory reports and click on the Replenishment tab.

The date range will be set to forecast the next four weeks by default, but can be reconfigured to suit your needs.

Forecasted demand 

This default measure shows how much stock you would need for a selected period. If you want to determine how much stock you might need for the next 6 weeks, you would choose a forecast period of six weeks in the date picker. The column will display how much inventory of each SKU it estimates you would need for that period, using historical sales data to calculate expected demand. 

Suggested order quantity

Suggested order quantity takes forecasted demand and subtracts closing and inbound inventory to reliably predict how much stock you should order for the selected date range.

Understanding demand forecasting calculations

Items sold per day (excluding stock outs)

The Items sold per day (excluding stock outs) calculation is based on how many units were sold in a 6 week period minus the number of days the item was out of stock. For example, if a product sold 50 units in the last 6 weeks (42 days) but was out of stock for 10 days, the calculation would be 50 units divided by 32 days (42-10) = 1.5 items sold per day (excluding stock outs). This number is then used to calculate missed items sold, forecasted demand, and suggested order quantity.

Missed items sold

The Missed sales column is calculated by multiplying Items sold per day (excluding stock outs) by the number of out of stock days from the last 6 weeks of historical data. Following our example, if a product sold 1.5 units per day (excluding stock outs) and was out of stock for 10 days, there would be 15 units that could have been sold if it wasn't out of stock.

Forecasted demand

Forecasted demand calculations are based on Items sold per day (excluding stock outs) to determine how much stock you will need for a forecasted time period and how much you should order to meet that need. The system looks to historical sales data to make these calculations:

• If there are at least 21 days in stock within the 6 week look back, the system will calculate missed items sold with as many data points as possible within that period.
• If there aren't at least 21 days in stock within the 6 week look back, the system will look back 10 weeks to find 21 in stock days and will calculate missed item sold based on those 21 days in stock.
• If not, the system will not calculate missed items sold.

Looking back to in-stock days ensures there's enough historical data for accurate sales rates for both high and low volume items and more reliable recommendations for more products.

The system then multiplies items sold per day (excluding stock outs) by the number of days in your forecasted time period to determine how much stock you'll need to meet your projected demand. For example, if a product sold 1.5 units per day (excluding stock outs) and your forecasted time period is 6 weeks (42 days) you would need 63 units to meet projected demand.

Suggested order quantity

The Suggested order quantity column is calculated by taking the Forecasted demand number and subtracting closing and inbound inventory from it. This ensures that the recommendation takes into account any inventory you currently hold or are expecting to arrive from suppliers or other outlets. For example, if you need 63 units to meet forecasted demand and have 50 units currently in stock, and no inbound inventory, you would need to order 13 units to meet projected demand.

Formatting results for multiple outlets

If you have multiple outlets, you can format these results to show a breakdown by outlet.

1. Click Format results.
2. Select By outlet.
3. Click Apply.

This will show the forecasted demand and suggested reorder quantity per outlet for each SKU. This can help determine which outlets need to restock and identify opportunities to transfer stock between outlets.

What's next?