The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain

4. The Link Between Inventory Management and Forecasting

As we discovered in Chapter 3, “Inventory Control,” there is a need to forecast demand over the protection period. For inventory management purposes, demand is often forecasted on a daily or weekly basis and combined with the lead time and/or the review interval to come up with the forecast of demand over the protection period. Inventory process performance is impacted in part by forecasting performance because the optimal timing or quantity of when inventory should be ordered and how much should be ordered depends upon the magnitude and uncertainty of demand, both of which are contingent upon the forecasting method and accuracy.

Forecasting is a vast field¹ ranging from macroeconomic forecasting ...