Best Amazon Inventory Management Methods - How To Forecast Your Product Demand

Summary

In this insightful video, Dylan Abraham from Forum Brands discusses strategic inventory planning and demand forecasting for Amazon sellers. He explains the importance of forecasting, how to prepare data, and delves into three forecasting methods using Excel. Dylan also shares insights on optimizing communication with factories and introduces Crystal, a new tool by Forum Brands for algorithmic demand forecasting. The conversation emphasizes the balance between data-backed decisions and risk management in growing and selling Amazon FBA businesses.

Takeaways

• 📈 **Importance of Forecasting**: Forecasting helps Amazon sellers to anticipate demand, enabling better control over inventory and strategic business decisions.
• 💡 **Data Consideration**: When planning inventory, consider sales data, seasonality, and any anomalies that might affect future demand predictions.
• 🔧 **Communication with Factories**: Enhancing communication with factories can lead to better lead times, understanding of constraints, and improved business relationships.
• 🛠️ **Forecasting Methods**: The video discusses three forecasting methods: linear regression, simple moving average, and exponential smoothing, each with its pros and cons.
• 📊 **Excel for Forecasting**: Microsoft Excel is highlighted as a useful tool for implementing the discussed forecasting methods.
• 📉 **Dealing with Anomalies**: Smoothing out anomalies in sales data is crucial for creating a reliable forecast.
• 🔑 **Seasonality**: Understanding seasonality is key for accurate demand forecasting, especially for businesses with seasonal peaks and troughs.
• 🚀 **Strategic Advantages**: Accurate forecasting can lead to reduced costs, minimized out-of-stock situations, and better financial planning.
• 💼 **Supply Chain Planning**: Forecasting aids in supply chain planning by helping to consolidate shipments and maximize container space utilization.
• 🎯 **Goal Setting**: Setting clear goals is crucial for turning vision into reality, and forecasting plays a part in achieving those goals.
• 🔄 **Adjusting for Realities**: Forecasting should be combined with market research and risk assessment to adapt to real-world business dynamics.

Q & A

What is the primary focus of the conversation between Dylan and the host in the video?

The primary focus of the conversation is on how Amazon sellers can better plan their inventory and forecast demand using different forecasting methods.

What is Forum Brands and what does Dylan do there?

Forum Brands is an e-commerce operating platform that buys Amazon FBA businesses and builds them into world-class consumer brands. Dylan is the Director of Logistics at Forum Brands.

Why is forecasting important for Amazon sellers according to Dylan?

Forecasting is important for Amazon sellers as it helps in strategic decision-making, managing inventory, understanding seasonality, financial planning, supply chain planning, and reducing out-of-stocks, among other benefits.

What are the three different forecasting methods discussed in the video?

The three different forecasting methods discussed are linear regression, simple moving average, and exponential smoothing.

How does preparing data for forecasting impact the quality of the forecast?

The quality of the forecast is directly dependent on the quality of the data used. A forecast is only as good as the data that goes into it, so it's crucial to prepare the data accurately and consider factors like sales, time periods, and anomalies.

What is the significance of understanding seasonality in a business when planning inventory?

Understanding seasonality helps in anticipating demand fluctuations throughout the year, allowing businesses to plan their inventory and production schedules accordingly, which can lead to better financial and supply chain management.

How can Amazon sellers consolidate shipments to maximize container space and reduce logistics costs?

Amazon sellers can consolidate shipments by understanding their demand across their entire catalog, matching it with lead times and production schedules, and arranging to have multiple SKUs shipped in a single container, which can save around 20-30% on shipping costs.

What is the Crystal tool developed by Forum Brands and how can it help Amazon sellers?

Crystal is a forecasting tool developed by Forum Brands that can be plugged into an Amazon store to output an algorithmic forecast. It helps Amazon sellers by providing a more accurate and automated way to forecast demand, which can improve inventory management.

What is the recommended approach for Amazon sellers when dealing with uncertainty in demand forecasting?

When dealing with uncertainty, it is recommended that Amazon sellers lean towards over-ordering, especially if they have the warehouse capacity and cash flow management to handle excess inventory, as the compounding impacts of being out of stock can be more detrimental to the business.

How can good inventory management positively affect a seller's relationship with manufacturers and factories?

Good inventory management can lead to better communication and transparency with manufacturers and factories. By providing longer and more accurate forecasts, sellers can help their partners plan resources, potentially negotiate better pricing, and improve payment terms.

What advice does Dylan give for Amazon sellers preparing for special occasions like Christmas?

Dylan advises Amazon sellers to ensure they have good data for forecasting, smooth out any past anomalies or out-of-stocks, and plan for success by leveraging historical data to anticipate seasonal spikes in demand, especially for top-performing items.