there's one area that a lot of people have a difficult time understanding and that is demand forecasting for their inventory on Amazon so there are typically two different categories that people are going to fall into current Sellers and new sellers so if you are a current seller you can fall any range of having product already there to having sold it for years and years the longer you have sold the product the more data that you have to be able to understand demand forecasting for you know what you should be looking at if you are let's say having sold for the last 2 years you can look at your 12-month summary behind you and then add on whatever you are up year-over-year on to understand how much inventory you should be sending in however if you are a new seller that problem gets a little bit more difficult because you have no data to go off of or at least you don't think you have data to go off of so we're going to dive into the two different scenarios here how to demand forecast properly where to look at for demand forecasting on Amazon and look at each and every single one of them so first and foremost let's take a look over for someone who's a current seller so if you are a current seller you have product that's being sold for you know a while now at the very least you can come over here to inventory then you can go over to your inventory dashboard for FBA uh once you go over to your inventory dashboard we're going to come down here to restock inventory so this restock inventory is going to give us a good idea of all of our products we'll just do it by sales summary right now for the last 3 days and this is going to tell us a lot of information one if we actually need to be sending in any inventory what our recommended chip date is going to be for that inventory so all of this comes off the idea of Amazon wanting to have roughly uh 30 to 60 days minimum of inventory in at any given time so Amazon has that calculation probability you're able to kind of see and predict when you gonna have to send in inventory so Amazon as you can see says recommend chip date for this product right here is the 7th of this month uh why are they saying that well it's because currently we only have around a 53 day supply we will probably run down to 45 days here shortly within next couple of days Amazon wants to keep us above that number so they will consider anything that is 45 days uh to be you know outside of what we should have as far as inventory goes and what they recommend is the minimum inventory level to not incur low inventory fees so you always want to take into consideration what Amazon is going to consider to be low inventory because some people may say oh I don't want to keep more than let's say 30-day supply on hand but uh you would be constantly getting hit with low inventory fees from Amazon so secondarily to this they have this cool little tool for forecasting so you can look at this and you can see your unit demand forecast so what this gives you is essentially a historical date range of a certain time frame and a forecast for the future so if we take this historical datee range let's just do the last two year or last uh half year and then we will do it forward for the next half year so as you can see uh we have a somewhat just graph here showing exactly what we can imagine for our actual demand forecasting so this little died line here is Amazon's optimistic idea and it's usually right or under this within 90% the time uh for what they think we are going to need over the next couple of weeks here uh secondarily to that they have uh what we did last year on this unit at that same time so a few things that play into this is how much are we going to outdo last year's sales so again if you are up let's say 20% over last year as far as sales and unit sold goes then you can accurately predict that you're likely going to need about 20% more than you did last year now if you're somewhat in the same Baseline if you're still uh seeing some issues and whatnot with your inventory control then there's potential where you're not going to actually need uh any more than that however this tool is going to be really useful for us for understanding okay if we have a uh 3-month manufacturing cycle which you know many people do so if you have a 3mon manufacturing cycle and that takes 3 months to make 1,000 units and and you are typically going to sell through around 1,000 units within 90 days as you can see for instance this one we have about 1,900 units and our total day supply is 93 meaning that within uh the next probably 3 4 weeks here uh we are going to need to start looking at having this replenished so we just sent in a replenishment as you can see here this day supply will show us everything we have so it's total inventory Supply which is available inbound and reserved we can see our inbound of 360 which is about a uh one month's or about a half month supply and then we can also see our reserved what is the reserve for FC processing transfer so it's transferring between fulfillment sers so uh when you are looking to typically send inventory to Amazon again I'm going to recommend uh you try and keep somewhere in the ballpark of 60 to 90 days of inventory uh at Amazon at any given time this covers you for a few different areas one it covers you for the idea of not having any low inventory fees uh that's going to be extremely important because we don't want to be overcharged by Amazon for anything secondarily to that as well it also covers you in the event of growth so if you are in a growth mentality when it comes to your product right now let's say you're trying to grow 10% 15 20% it is good to understand that you should have roughly 69 days now there are few different areas where there are some outliers that you have to keep in uh mind such as do you have a product that's seasonal most people do so let's say your product is either winter seasonal or summer seasonal so if your product is a summer seasonal item you should be looking at the idea of having it restocked before you get into the summer and then have a separate inventory forecasting measurement for the winter months so typically if you're going to let's say have a 50 to 6 % decrease uh of overall sales velocity during the winter you want to prepare for that you want to make sure you're not sending in in the winter months you know that 50 plus per of actual inventory that you would normally not need during that time seasonality is one of the biggest factors to take into consideration and usually requires you to have multiple different forecasts throughout the year so you can't just do a 12-month forecast assume that that's going to be everything uh and go from there it's usually best to have roughly a 3 to six month forecast ahead of time of what you are going to do such as the fact of looking at our forecast we can accurately assume that in the next 6 months we're going to have around let's say an increase of 100 units uh so we'll want to keep that in mind for when we are pushing forward for the restocks along that same measure as well is the idea of uh the product sales growth so are you looking at having extra advertising expenditure so if you are looking at advertising and sales growth uh you want to make sure that you're going to align with that you don't want to be caught up with all of this inventory just six months plus of inventory because that ties up funds that could be going towards something like advertising now let's say all of this does not matter because you do not have a product on Amazon yet you are looking at selling a product well there's an easy way predict what you should be sending in for that as well if we head on over to Amazon and we just search up uh let's do cooking boards if we're looking at cooking boards you can see we have a million different choices here probably not the best uh place to get into but we can easily look at all of these different cooking boards now uh when you are first and foremost going to sell a product you should always research who your competitors are going to be you should understand from a granular level what you can expect to be getting out of this category so if we want to just go to The Cutting Boards category we'll come here for Best Sellers and cutting boards and we can start to see who is selling the best what they are selling price-wise so let's say we wanted to compete uh in a little bit more of a uh Niche way and we wanted to compete solely against uh glass cutting boards so what we would do is we would look through here understand where the first one for glass is so it looks like this one we have a tempered glass one who is number 45 in the category so let's click on that one and a little interesting thing you can do is if you have helium 10 you can go here and you can click X-ray and this is going to give us some understanding of the actual product what the sales velocity is how much uh they're actually making off of the product so as can see here in the last 30 days they have sold uh accumulative 8 00 units across all of their different uh variations so you can see they have a couple different variations here so all of these variations have sold roughly 1,800 1900 units now uh when going into a category you have to understand that you are not going to immediately take over from somebody else's sales velosophy they have more ranking they have a higher BSR they have more ratings overall uh there is a lot of different factors at play here however you can roughly estimate that you may be able to take let's say 5% uh if you are looking at taking 1 to 5% of the actual uh Marketplace here you can understand and start to have an idea of how many units you're going to need so let's say you want to take over 5% of the actual marketer so if we take that 1,800 units per month we multiply that by 5% we would need roughly 90 units per month month so take that times 90 uh oops wrong way there you would take that 18800 so at 90 * 3 there we go 270 uh so you would take that 270 uh and you would understand that that's roughly how much you're going to need to get started you're going to assume you're going to be selling about 3 units a day right so that is you know or sorry one unit a day for the next you know 90 days uh overall so essentially that's where you're going to want to say Okay I want to take 5% of this particular as market share I'm going to launch a similar product I have some good ideas for it that I can take you know a certain percentage in the next 90 days uh from that aspect as well you have to understand that you are still going to have marketing dollars you're still going to have to inventory forecast and after your first month that is the point in which you will understand and start to be able to utilize this demand forecast so once you have 30 days worth of data you have 270 units let's say you weigh under predicted and you've taken 20% market share okay now we're going to have to you know get four times as much inventory as we really thought we would need which is one of the things that this tool will help you understand and do is just demand forecast for that uh possibility Amazon's tool is based on uh algorithms that understand uh the idea of growth potential on all of the products so you can have a relatively easy idea uh of what you're going to be doing so it only takes about 30 days from new seller to having demand forecasting If the product has enough sales velocity now the one thing to note is that not every single product is going to have this kind of demand forecast you know if we go all the way to the very back here uh we can see there are zero or zeros here so we don't have enough enough data uh to provide a forecast for the actual uh you in demand of this so this really just comes down to uh does your product to have enough sales velocity if you are not having enough sales velocity then this is not going to be helpful to you as you're not going to be able to properly predict now that also comes into play if your product is not selling currently or you are having sales issues you can generally assume that you're going to run into excess and Overstock inventory in which case you should start looking at the idea of uh changing your actual sales plan rather than looking at your demand forecasting so the longer this time frame of total days of Supply keeps going up the longer you can assume that Amazon is not going to be pushing the product uh in any way shape or form so this is a very rough and easy way uh of understanding the actual demand forecast of your product again recommendation on my end is always going to be 60 to 90 days worth of inventory at any given time you always have to take into account your manufactur time your shipping time if you're going to be getting it done in China it's going to typically take about a two weeks to a month depending on what your product is for the manufacturer it's going to take another two to three weeks for it to get here from boat so you're always going to be looking at having all of your shipments put together all of your demand forecasting about two months in advance from when you're actually going to have that product sent over to FBA and be available to the end consumer so uh take that into account when you're doing you know 69 days worth of inventory uh you can also start utilizing new tools like AWD send in six months worth of inventory to AWD and then constantly replenish FBA from that inventory makes it very very simple to never run out a stock which as we all know is the number one sin on Amazon so hopefully this helped you understand demand forecasting a little bit better happy to do even more in depth in the future and looking forward to more sales