6. How to Set up Your Forecasts
PLEASE HAVE EVERYONE ON YOUR TEAM WHO DEALS WITH INVENTORY STUDY THIS COURSE.
We also highly encourage you to book your one-on-one onboarding call WITH YOUR TEAM so everybody is trained. :) Schedule an onboarding
In this module, we will show you how to set up your forecasts. We'll also cover some optional advanced forecast settings. You do not need to study every video. These are optional depending on how granular you want your forecasts to be.
Watch the full overview below, or select a specific Forecast tool from the list below to fine-tune your forecasts.
- Set up your Order & Transfer schedule
- Set up your Velocities
- Lead Times (Standard & Express)
- Transfer Times
- How Stockouts work
- Using the Trend Tool
- Filter out Past Sales Spikes
- Filter out Deep Discounts
- Add Additional Sales Growth
- Add upcoming Lightning Deals or Promotions
- Add Seasonality to Your Forecasts
- Create Custom Dashboards
Set Up Your Forecast, Full Overview
How to Set up Your Forecast, Step-by-Step
When you go to your Forecast page, the first thing that you'll see is we have a lot of different dashboards just like we have on every page, and the default dashboard is called "Orders by Supplier". What that means is you're looking at the supplier name and all of the products for that supplier. It will also tell you if you need to place an order for this product based on your current forecast settings (it will have a green button next to it).
If you click that green button, it will create a purchase order.
If you click the blue button, it will create a transfer which means moving existing inventory from a warehouse that you set up previously.
If you click the green button up here, it's going to create one purchase order for all of that inventory marked with a check mark here.
Over here we have "Days Until S.O." or days until stockout and basically, that's just taking your adjusted velocity which is your average daily sales divided by the amount of inventory you currently have at FBA or coming inbound to FBA, and giving you approximately how many days of inventory you have left at FBA. If the numbers under your Days Until S.O are red, that means we're predicting a stockout -- either right now or in the future and you'll get a little red exclamation in there.
Groups and Filters
Before we dive into how to set up your forecast, there's a couple of things I want to point out -- one is the grouping. By clicking on the "Group by Supplier" up here, you can choose to group by supplier, group by warehouse, group by brand, or group by none. We are currently grouped by supplier.
The only filter that we have defaulted is active -- so these are all active products by the supplier.
Now, if you want to group it by the marketplace, you can add a filter and select "Marketplace", choose the country for that marketplace, and click on the "Apply Filters" once you're done.
3 Ways To Calculate Average Velocity
Now, let's jump into forecasting. We're going to use this Stainless Cocktail Shaker as our example product. The first thing that we're going to do is to click on this velocity number.
You'll see that it gives us a couple of different options on how to calculate our velocity and our future forecast. So what the velocity is looking at is these seven periods of time -- from the last 2 days to the last 180 days -- averaged out. The simplest way to explain this is for example in the last 2 days, this product has sold 19.50 units per day -- so this is average sales per day in units. What this " Use Velocity Calculation" is doing is it's averaging out all the averages. As you can see here, the total number of units sold in the last 180 days is 199.15 divided by 7 periods is an average adjusted velocity of 28.45.
Now, let's say I only wanted to look at the last 30 days -- I could simply uncheck the 180, 90, and 60 days and you'll see that the average adjusted velocity is recalculated.
We also have the option to turn on weighted averages which most people don't use but if you want to, you have that option. You could also put a heavier emphasis on one period of time versus another period of time.
The next option you have is Manual Velocity. So let's say you're launching a new product or your product's been out of stock for a long period of time that is more than we can compensate for, we do have a stockout tool which I'll show you later. But if you've been out of stock for several months or it's a brand new product and there's no Amazon data for us to calculate, you could just put in a manual velocity. So in this example, I predict that this product is going to sell 12 units a day. If I save that, then it will go ahead and predict 12 units a day indefinitely until I either switch back to my velocity calculation or until I manually change that number.
The third option is if you have a full year of sales data from Amazon Seller Central then what SoStocked will do is it will actually look at the sales in the last 365 days and it will duplicate that for this year's forecast.
You can also choose if you want to look at it daily, weekly, or monthly but it's probably easier to look at this monthly.
Once you've chosen your methodology of calculating your baseline velocity and forecast for this product, you can scroll down and click " Save & Apply To This Product Only".
You can also click on this drop-down button and choose if you want to save and apply to all products, all filtered results, products from this supplier, products under this brand, products in this marketplace, or products with this tag.
In this case, we're just going to use the default setting to keep it simple where we're averaging out the last 180 days.
Now that we have our baseline velocity calculation and forecast, click on the number of days until stockout to open up some advanced forecasting tools.
Now, let's go look at the Calculation Variables which is this box here. About 90 - 95% of all of your forecasting is based on what you put into this box so it's very important that you pay attention and you set this up correctly or your forecast and recommendations won't make sense. You'll end up thinking that the system doesn't work but actually, you just didn't tell the system what to do.
So first you see our Order Schedule and Transfer Schedule -- these are all based on your lead time. Ordering means purchasing new inventory from a supplier and Transferring means moving existing inventory from a warehouse into FBA or its final destination.
If your lead time is going to a 3rd Party Warehouse, you're going to have to set up an order schedule and a transfer schedule.
If your lead time is just going direct to Amazon and it's not going to a warehouse, then you can skip the transfer schedule because that doesn't matter -- it's irrelevant in this case.
Now, for your order schedule, click on " As Needed".
You have a lot of different options here -- the first one is the Order Frequency or how often do you like to place inventory orders. The default setting for this is every month starting on the 1st of the month but you can change that to every week, or every custom # of days.
No matter what you choose, you always want to give a day of the month or day of the week to repeat your ordering. So if I choose " Every 4 months", and I start on July 1st, then my next order is going to be 4 months from July 1st which would be November 1st -- so that's when I could expect my first recommendation to place a new inventory order from SoStocked.
The other option is to do as needed which opens up this min-max restocking option down here. "As Needed" is very helpful for advanced sellers who want to keep minimum buffer stock and maximum stock as well. Buffer Stock is calculated in either days or units but I personally like FBA buffer stock in days because it's a dynamic number and it changes as my velocity changes.
We are working on launching an Inventory Management Tool for Amazon's new account-wide max storage limits, so let's just ignore this "Use IPI Limit" for now. Again, you can save and apply to any grouping of products.
Now, let's go back to the Calculation Variables. It's always a good idea to set a Minimum Order Quantity (MOQ) and a Minimum Transfer Quantity (MTQ) if you're transferring. That way, your order and transfer recommendations are always divisible by the numbers that you actually purchase from your supplier or transfer from your warehouse. The same applies to the units per carton.
The Express Lead Time is an advanced tool that basically gives you an option of having a backup, secondary lead time that will get you in stock faster.
So in this case, it's the Air Freight. What this Express Lead Time will do is if it predicts a stockout at any point in the future, it might use this express lead time to either bypass that recommended normal shipment or to split it so that some of it's coming by air and some of it's coming by your default lead time so that you don't run out of stock or at least your stockout is as close to the minimum as possible.
Now, your Transfer Time has a default transfer time of 10 days but you can change it to whatever you want and this one is just the number of days that it takes to get from your warehouse into Amazon.
Now, let's look at the Inventory Timeline. This number up here (the one under the FBA Inventory column) is telling us what we currently have at FBA. This number down here with a right arrow sign is telling us that we have a current work order or transfer order that's coming into FBA any day now and it's just waiting to check-in.
This is our Daily Velocity and as you can see, we're averaging about 29.90 units per day and as those sales go down, you'll see it's deducting from our FBA Inventory.
Now, when SoStocked predicts that you need more inventory transferred from your warehouse, you'll see a transfer button like this and if you click on it, it will tell you forecasted transfer with an expected ETA or the Estimated Time of Arrival. If you don't understand why it's recommending this, go look at your Calculation Variables because this number is 100% based on what you told the system you want.
Now, let's jump into some of the advanced tools here. Click on the blue "off" button for the Trend tool.
If you turn this "Trend Included" button on, it will allow you to look at a period compared to an earlier period to see if it's going up o down in your sales trends.
Click on the blue "off" button for Sales Spikes.
The sales spikes tool is something we can turn on but the default setting is off. Basically, that will remove any giant spikes in sales from your forecast so that we're only looking at realistic daily average sales.
Click on the blue "off" button for Deep Discount Sales.
When turned on, the deep discounts will look in the past at any time you lowered your price more than 30% and remove those sales from your forecast.
Click on the blue "2 days" button for Stock Outs.
The stockout tool is always turned on unless you turn it off. It's going to find any day where your inventory went to zero or if it's a high-velocity product, any day that your sales dropped by more than 70%, we'll consider that a partial stockout so we will remove that from your forecast. Instead, it will give you an average of what you would have sold if you were in stock.
After Stock Outs, we have a tool here called Include MCF Sales. MCF stands for Multi-Channel Fulfillment that basically means anything you're selling on another platform but still fulfilling by Amazon like if you had a Shopify site with an FBA plug-in. all those sales will be recorded here.
Now, click on the blue "0%" button for Additional Sales Growth.
From here, you can just type in a percentage that you expect to grow by and add that to your timeline. You can also add that to all products or any grouping.
The last two tools I want to talk about are the Future Lightning Deals and Future Seasonal Spikes. First, click on the blue "500" button for the Future Lightning Deals.
So unlike other forecasting tools, we give you the option to actually pre-plan increases in your sales velocity. For example, let's say this date was Father's day and we are going to sell the additional 500 units we expect, we could pre-program that and you can add as many units as you want. We call this "Lightning Deals" because most of the Amazon sellers are using this so that's simply common terminology.
Now, let's click on the blue "803" button for the Future Seasonal Spikes.
The seasonal spikes tool is similar, but this one works in percentages. So you simply put a Date Range, Name, and what increase in the percentage do you expect. You just type that in and save it. You can also do a negative percentage if you know that your sales go down at a particular time of the year and you can add as many of those as you want as well.
The last thing I want to mention is some of the dashboards that we've created up here. Click on this dashboard named "Transfers - 30 DAYS".
It's basically just filtering transfers here and you can group by warehouse instead of by supplier and create one work order or transfer order for everything recommended per warehouse.
We do have videos on how to customize and create new dashboards but essentially it's a combination of filters, grouping, and so forth and you'll simply click the button with three dots up here and select "Add as a New Dashboard".
That's about it for the& Forecasting here. Again, we want to keep it simple. You're all going to have your own individual ways of how you do things. So go ahead and set up your products, do your calculation variables, save it by your groupings, and then from that point forward, you should be able to trust the recommendations given by SoStocked and if you have any problems, let us know.