Demand Forecasting to Optimize Inventory Levels

How KIM Utilizes Moving Average Demand Forecasting to Recommend Order Quantities?

The purpose of a truly robust and full-featured inventory management program is not just to tell you when you have hit some arbitrary reorder point and then reorder another arbitrary quantity of stock to replenish your inventory levels to where they "should" be. More powerful inventory management systems use Demand Forecasting to help you predict future sales demand based on collected data of past sales history. This is one of the main reasons we chose the name Kinetic Inventory Management (KIM) for our inventory management system because the word "kinetic" means "to be in motion". Nothing about managing inventory is ever static or non-moving. So KIM is designed to make use of constantly changing data to keep readjusting your inventory needs for every item in your store.

Demand Forecasting Using the Moving Average Method

To summarize briefly how KIM can help you forecast sales demand, we decided to use a simple but effective method of using a moving average of real sales history gathered from your actual online sales through your osCommerce store. This moving average is calculated for each of the items in your catalog. You are completely in control of what period of time you want to use for these calculations. If your products are seasonal in nature, you may wish to use a fairly short time frame of several weeks. On the other hand, if most of your store items sell fairly consistently throughout the year, you could enter a time frame of six months or more. The theory behind this moving average method is that a good indicator of future sales demand is recent past sales demand.