Demand forecast
Also called forecast
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is demand forecast?
A demand forecast is an estimate of how much of an item customers will buy in the coming weeks or months, used to plan purchasing and stock levels. It is built mainly from demand history (past sales plus recorded lost sales) and adjusted for seasonality, trends and known events, and buyers use it to set reorder points, min/max levels and purchase quantities.
How it works
Known events include a large project a customer has announced or a promotion, which history alone can’t predict. Forecasts are compared with actual sales afterwards, and items whose demand is erratic get more safety stock or are handled as special orders.
Demand forecast example
Sales of a pool chemical double every May and June. The forecast reflects that, so the buyer raises orders in March instead of reacting in May.
Related terms
- Lost salesLost sales are customer demand a distributor couldn’t fill and the customer didn’t wait for, such as a line cancelled because the item was out of stock.
- Reorder pointA reorder point is the stock level at which a distributor places a new purchase order for an item, set so the new stock arrives before the old runs out.
- Safety stockSafety stock is extra inventory a distributor keeps to cover unexpected demand or late supplier deliveries, so it doesn’t run out before the next shipment.
- Days on handDays on hand is the number of days a distributor’s inventory would last at its rate of sales.
