Removing Sales Spikes from Your Forecast
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Overview
Sales spikes are short periods of high-velocity sales that paint a false picture. If you don't remove these spikes from your forecasting, you may end up ordering too much inventory, which ties up cash flow.
Sales Spikes
Let me show you how to use sales spikes to better determine the sales of your business. We're going to use this Stainless Cocktail Shaker as an example -- click on the number under the "Days Until S.O."
Sales spikes are very important to be able to factor out of your forecast. So let's say you're using an average and maybe you're looking at 30 days, 60 days, and 90 days -- the thing that will start to occur is that for example if you have a prime day that happened 80 days ago but you don't remember it because you're not thinking about the prime day sales, these averages could be thrown off significantly. If you're not factoring in your prime day or you're not factoring out your prime day sales, your average could be much higher and you could be ordering much more inventory than you actually need to order because that average is being thrown off by a big spike in sales such as the prime day or Black Friday.
You can actually locate and factor out all of the sales spikes -- if you go down here, there's this item under Calculation Variables called Sales Spikes and you can click on this blue off button.
It's defaulted to be turned off, but if you turn it on, you can see all of the times when there were sales spikes -- it's anything that is 150% of your average sales for that period. It will be found and isolated, and each one of these can be either included or excluded.
As you can see, we are eliminating the sales that are more than the average velocity of this product which is 39-40 units. We are doing this since it's going to affect your average.
Click on the " Save & Apply To This Product Only" button to apply that to the forecast.
As you can see, 21 of those sales spikes are factored out and that helps you to better determine what your actual velocity is by eliminating some of these sales spikes that are occurring and are throwing off your averages.