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Home › Knowledge Base › Demand Planning & Replenishment › Inventory Forecasting: Projecting What You Will Actually Have on Hand

Inventory Forecasting: Projecting What You Will Actually Have on Hand

Demand Planning & Replenishment Updated 2026-08-16· 11 min read

In brief. Inventory forecasting projects what you will have on hand, week by week. It is the demand forecast combined with your open purchase orders, lead times and receipt schedule. A demand forecast says customers will buy 640 tees next week; an inventory forecast says you will end that week with 3,040 units and hit zero in week 16.

Key facts

Most articles on this subject use "inventory forecasting" and "demand forecasting" as if they were the same thing. They are not, and the difference is the whole job. This page sits under demand forecasting for apparel brands and covers the supply side of the projection: on-hand balances, open orders, coverage, and what changes when your next receipt is on a vessel.

What is inventory forecasting, and how it differs from demand forecasting

A demand forecast predicts what customers will buy. An inventory forecast predicts what you will have on hand. The second is the first combined with your supply position: opening stock, open purchase orders, expected receipt dates, lead times and any backorders you owe.

Two brands can run an identical demand forecast for the same tee and produce completely different inventory forecasts, because one has 6,000 units landing in week 7 and the other has nothing on order. The demand forecast is a market statement; the inventory forecast is a statement about your own supply chain, and it is the one that tells you whether to act.

That distinction also settles a family of near-identical phrases. Demand forecasting for inventory management, demand forecasting and inventory management, inventory management forecasting and demand prediction for inventory management all describe the same join: using a unit demand forecast to size and time stock. Inventory demand planning and demand and inventory planning name the process that does it. The methods behind the demand number are covered in demand forecasting methods and techniques.

The inventory position equation: on hand plus on order minus backorders

On-hand stock is not your inventory position, and confusing the two is the most common error in replenishment.

Inventory position = on hand + on order − backorders

On hand is physically in the DC and sellable. On order is every purchase order placed and not yet received, whether it is fabric in a dye vessel or a container off Long Beach. Backorders are units already promised to a customer and not yet shipped.

A reorder point is compared against inventory position, never against on hand. If you compare against on hand alone, you re-order goods that are already on the water and double your buy. The Demand Driven Institute's DDMRP method formalises the same idea as a net flow equation, and frames the underlying problem exactly as apparel experiences it: "customer tolerance times are dramatically shorter than cumulative lead times."

How to forecast inventory week by week: a worked forward projection

Forecasting inventory is arithmetic, and it is the arithmetic no incumbent article shows. Opening on hand, minus forecast demand, plus receipts, equals ending on hand. Carry it forward.

Basis: one core 180 gsm cotton crew tee, one colour, all sizes, entering a spring-summer ramp. Opening on hand 4,200 units. One purchase order of 4,500 units already placed and expected sellable in the DC at the start of week 7. Demand is the agreed unit forecast. Forward weeks of supply is ending on hand divided by the average forecast demand of the following four weeks; the last rows use the weeks remaining in the horizon.

Week Opening on hand Forecast demand Receipts Ending on hand Forward WOS
1 4,200 420 — 3,780 8.4
2 3,780 420 — 3,360 7.2
3 3,360 420 — 2,940 5.9
4 2,940 480 — 2,460 4.7
5 2,460 480 — 1,980 3.7
6 1,980 480 — 1,500 2.6
7 1,500 560 +4,500 5,440 9.1
8 5,440 560 — 4,880 7.9
9 4,880 560 — 4,320 6.6
10 4,320 640 — 3,680 5.5
11 3,680 640 — 3,040 4.4
12 3,040 640 — 2,400 3.4
13 2,400 700 — 1,700 2.4
14 1,700 700 — 1,000 1.4
15 1,000 700 — 300 0.4
16 300 760 — −460 stockout

Total forecast demand across the 16 weeks is 9,160 units. Total supply is 4,200 on hand plus 4,500 on order, or 8,700. The shortfall of 460 units was arithmetically certain in week 1, and nothing in the week-1 on-hand balance of 4,200 units hinted at it.

The reorder decision that prevents the week-16 stockout

Run the reorder point over the same programme, using King's formula for combined demand and lead-time variability, at a 95% service level with the correct one-tailed Z of 1.645:

Now compare against inventory position, not on hand. In week 1 the position is 4,200 on hand + 4,500 on order − 0 backorders = 8,700 units, already 631 below the 9,331 reorder point. The trigger fires in week 1, fifteen weeks before the stockout appears in the projection.

A 6,000-unit purchase order placed in week 1 arrives at the start of week 14 at a 13-week PO-to-DC lead time. Re-run the last three rows:

Week Opening on hand Forecast demand Receipts Ending on hand
14 1,700 700 +6,000 7,000
15 7,000 700 — 6,300
16 6,300 760 — 5,540

The stockout is gone, and week 16 closes with 7.3 weeks of cover at the prevailing 760-a-week rate. Check the quantity against the mill before releasing it: at 0.27 kg of fabric per tee, 6,000 units is 1,620 kg, comfortably above the 300-500 kg dye-vessel minimum for a custom colour. See how fabric and dye-lot minimums set apparel MOQs and reorder points when your lead time is 90 days.

Forecasting inventory based on sales, and the two shortcuts that use sales history

Forecasting inventory based on sales is what most small brands actually do, and there are two legitimate shortcuts before you build a full projection.

Target coverage. Decide how many weeks of supply you want to hold, multiply by forecast average weekly sales, and that is your target inventory. At 640 units a week and a 10-week target, you need 6,400 units on hand. Receipts required = target − projected on hand − on order.

Sell-through rate carried forward. If a receipt of 3,000 units sold 38% in its first four weeks, and nothing about the next receipt differs, 38% is a defensible planning assumption for the same window. Sell-through is meaningless without stating the window, so always write "four-week sell-through," never "sell-through."

Both are approximations of the same projection. They break in exactly one place: when receipts are lumpy, which they always are on an import programme, because a single container lands 6,000 units on one Tuesday.

Inventory forecasting methods, models and techniques compared

The table below compares the three inventory forecasting methods in general use, and what each one is actually for.

Method What it produces Horizon Fails when
Forward on-hand projection Projected balance and cover by week 13-52 weeks Receipt dates in the system are wrong
Target coverage planning Receipts needed to hold N weeks of supply 4-26 weeks Demand ramps sharply within the window
Reorder-point triggering A buy signal against inventory position Continuous Lead-time sigma is guessed rather than measured

Two notes on choosing among inventory forecasting models. First, run all three: the projection tells you what happens, coverage tells you what to hold, the reorder point tells you when to act. Second, apparel inventory forecasting techniques must run at size level or they will lie to you. A style can show 10 weeks of total cover while M and L are already gone, because the tail sizes carry the average: size curves and the SKU explosion.

Anticipation inventory meaning, and when an apparel brand builds it

Anticipation inventory is stock built deliberately ahead of a known future event, as distinct from safety stock, which covers unknown variation. The anticipation inventory meaning that matters operationally is that it is a planned, budgeted decision with a named cause, and it should appear in the projection as a deliberate hump rather than as an accident.

The four events that justify it in apparel sourcing:

Coverage and weeks of supply: how to read the projection

Units answer "how many." Coverage answers "for how long," and coverage is the number that makes a projection legible.

The difference matters when demand is ramping. In week 12 of the worked table, 2,400 units is 3.8 weeks of cover at the trailing 640-a-week rate but only 3.4 weeks against the forecast 700-plus. On a ramp, backward-looking coverage always flatters the position. These formulas are set out in Toolio's retail math reference; open-to-buy converts the same plan into dollars in open-to-buy planning for apparel brands.

What changes when your replenishment lead time is a 90-day import pipeline

Every generic guide to forecasting and inventory management assumes a domestic warehouse restocked in a week. Four things change when the pipeline is an import programme.

The projection has to run longer than the lead time. A 16-week projection on a 13-week pipeline gives you three weeks of decision room. Run 26 to 52 weeks.

A visible stockout is often already unavoidable. In the worked example the week-16 shortfall could still be fixed in week 1. Spotted in week 6 it could not, because 13 weeks PO to DC lands the goods in week 19. The action date is earlier than the problem date by one full lead time.

Receipt dates are estimates with a distribution, not facts. Repeat orders run 8-12 weeks PO to FOB from India and Bangladesh; first orders run 10-16 weeks PO to FOB, becoming 15-20 weeks PO to a US DC from India and 18-23 weeks from Bangladesh once ocean transit and clearance are added. Project against your own receipt-history mean, not the factory's quote.

Lead-time variance dominates the safety stock. Above, the lead-time term 570² × 2² contributes 1,299,600 of the 1,363,300 total variance against 63,700 from demand, so cutting lead-time sigma is worth roughly four times more than cutting demand sigma here.

Inventory forecasting systems, spreadsheets and what the software category is called

Two search phrasings are worth translating plainly. An inventory forecasting system and forecasting and inventory management software are the same category: demand planning or inventory planning software, sold standalone or as a module inside an ERP or merchandise planning suite. People asking for a business sales and inventory forecast program name usually want that category name; a business sales and inventory forecast spreadsheet is the same projection built by hand.

The spreadsheet is not a lesser tool at small scale — the projection above is five columns. What a system buys is not better maths but live receipt dates from the supply side, projection at size level across thousands of cells, and an audit trail on overrides. Terms used here are defined in the Yarnstick glossary of apparel sourcing terms.

Frequently asked questions

What is inventory forecasting?

Inventory forecasting is the projection of how much stock you will have on hand at a future date, by item and by period. It combines the demand forecast with your current on-hand balance, open purchase orders, expected receipt dates and lead times. The output is a projected balance and a date, not a sales number.

What is the difference between inventory forecasting and demand forecasting?

A demand forecast predicts what customers will buy. An inventory forecast predicts what you will have. The second is the first plus your supply side: opening stock, open orders, receipt dates, lead times and any backorders. Two brands with an identical demand forecast will have completely different inventory forecasts if their pipelines differ.

How to forecast inventory for the next quarter?

Take the opening on-hand balance, subtract forecast demand week by week, and add each open purchase order in the week it is expected to be sellable in your DC, not the week it ships. Carry the ending balance forward as the next week's opening. The first week the balance goes negative is your projected stockout.

What are the main inventory forecasting methods?

Three: forward projection of on-hand balance week by week, which is the core method; target-coverage planning, where you hold a set number of weeks of supply and back out the receipts needed; and reorder-point triggering, where you compare inventory position against a calculated threshold. Most brands need all three, at different horizons.

What inventory forecasting models work for apparel?

Time-phased projection models at style-colour level, disaggregated to size on a derived size curve. Apparel breaks single-number models because a style can hold total cover while the middle sizes are gone. Any inventory forecasting model that reports only style totals will show healthy stock on a style that is unsellable.

What are inventory forecasting techniques for slow-moving sizes?

Project slow sizes on the size curve rather than on their own sparse history, and judge them on coverage in weeks rather than units. A 2XL holding 11% of a curve will show erratic weekly sales and a stable share, so forecasting the share and applying it to the style total is more reliable than forecasting the cell.

What is the best way to forecast inventory when lead time is 90 days?

Project forward at least one full lead time beyond the horizon you care about, and act on inventory position rather than on-hand. At a 13-week PO-to-DC pipeline, a stockout you can see 10 weeks out is already unavoidable, so the decision point is always the earlier week when position fell below the reorder point.

How does demand forecasting in inventory management drive the buy?

The demand forecast sets the depletion rate in the projection. The projection produces a date at which cover runs out. The reorder point converts that date into a trigger against inventory position. The dye-lot minimum and open-to-buy then constrain the quantity. The forecast never places the order on its own.

What is inventory demand forecasting?

Inventory demand forecasting is demand forecasting done specifically to size inventory rather than to set a revenue plan. It is run in units at the level the stock is held, usually style-colour-size, over the horizon the replenishment lead time forces, and it is judged on service level and markdown rather than on revenue accuracy.

How much anticipation inventory should I build for a factory shutdown?

Multiply the forecast weekly demand across the shutdown by the number of weeks the pipeline is interrupted, then add the normal safety stock on top. At 640 units a week over a three-week closure that is 1,920 units. Chinese New Year runs two to four effective weeks, Tet one to two, and Bangladesh has two Eid periods.

How do retail inventory forecasting and open-to-buy fit together?

Retail inventory forecasting projects units and cover; open-to-buy converts the same plan into dollars you are still allowed to commit. The projection tells you a receipt is needed in week 14; open-to-buy tells you whether that month's receipt budget has already been spent by orders placed a quarter ago.

What is inventory planning and forecasting as a job function?

Inventory planning and forecasting is the role that owns the projected on-hand position: maintaining the demand forecast in units, keeping open-order dates accurate, running the forward projection, and raising reorder recommendations. It sits between merchandising, which decides what to sell, and sourcing, which decides where and when it is made.

Sources

Related in the knowledge base

A projected on-hand position is only as trustworthy as the receipt dates behind it, and receipt dates are only trustworthy when capacity is actually reserved.

See how Yarnstick reserves factory capacity against your forecast