Excel Inventory Forecasting: Tips, Tricks, & Techniques

Learn how to forecast inventory in Excel more easily with helpful techniques and tips to save time and reduce mistakes.

Marcel Deer
By Marcel Deer
Photo of Danell Theron
Edited by Danéll Theron

Updated December 16, 2024.

a laptop screen showing a line graph

Accurate inventory forecasting helps reduce inventory waste, prevent obsolete inventory, and promote financial health by ensuring optimal stock levels in your Shopify store. To achieve benefits like supply level optimization and more refined pricing and sales strategies, many brands turn to Microsoft Excel for their inventory forecasting needs.

While Excel can provide valuable insights into sales trends and demand shifts, it can be challenging to effectively apply inventory forecasting models in Excel. In this post, we explore techniques and tips to simplify the process and make inventory forecasting more manageable.

» Want to optimize your stock levels for better profitability? Learn how to supercharge your Shopify inventory forecasting

Marcel Deer

Meet the Expert

Marcel is an experienced journalist and digital marketing professional who specializes in writing about complex topics like inventory optimization. With a strong foundation in SEO, he produces impactful website content that enhances online visibility.



What is Inventory Forecasting?

Inventory forecasting, or e-commerce forecasting, helps e-commerce store owners better manage their inventory by predicting future product demand based on real-time inventory trends and historical metrics, such as past sales data.

Inventory Forecasting in Excel

Pros


  • Cost-effective: Many businesses already have Excel, making it a low-cost solution without the need for additional software or subscriptions.
  • Customizable: Users can create tailored forecasting models, allowing flexibility to meet unique business needs across various industries.
  • Data visualization: Excel enables the creation of graphs and charts to visualize inventory trends, aiding in decision-making.
  • Conditional formatting: Helps highlight important data points, such as low stock levels, making it easier to identify areas for action.

Cons


  • It doesn't scale well: As your product range expands, Excel struggles with large datasets, leading to slower performance and potential inaccuracies.
  • Collaboration challenges: Multiple users working on the same file can cause versioning issues and data conflicts.
  • It takes a lot of time: Entering data manually and analyzing it in Excel can be extremely time-consuming. Not only does this slow things down, but it also increases the chances of human error, which can affect the accuracy of your data.

» Learn how to automate your inventory management in Shopify


a diagram of how to forecast inventory in excel


Excel is a popular tool for demand forecasting because it's cost-effective and can use conditional formatting. Although it can be error-prone and a bit time-consuming, inventory forecasting models in Excel can still be an effective tool that helps you improve your inventory turnover if you know how to use it properly.

1. Moving Average

The moving average method can help you predict your future inventory demand by looking at the average value of past buyer trends and patterns over a given period. This method "moves" because it considers new data. For example, if you choose to calculate your average over three months, this method will use the data from January, February, and March. But next month, the data from February, March, and April will be used instead.

Analyzing an average gives you a baseline and helps combat fluctuations that might give you an incorrect reflection of your inventory demands. You can use this formula to calculate your moving averages:

Moving average = Select the revenue earned from the current month + X number of prior months + apply this formula: =AVERAGE(Data Range)

Screenshot of calculating moving averages for inventory forecasting in Microsoft Excel


» Here's everything you should know about inventory management



2. Linear Regression

The linear regression technique predicts demand by comparing two different variables—for example, the number of umbrellas sold vs. rainfall amounts. In this example, if you're forecasting umbrella sales, you'd use the rainfall amount as your independent variable and compare it to the number of umbrellas sold over a certain period to predict future demand more accurately.

To employ linear regression in Excel, follow these steps:

  1. Create three columns and choose one to contain each of the 12 months.
  2. Screenshot of Microsoft Excel table containing a date range
    
  3. Fill the other two columns with data related to the variables you wish to examine (e.g., rainfall in millimeters and the number of umbrellas sold).
  4. Screenshot of filling data into a table before converting it into a chart
    
  5. Select the two columns with data and insert a scatter chart into your spreadsheet.
  6. Screenshot of inserting a scatter chart into Microsoft Excel
    
  7. Add a linear trendline to the data points.
  8. Screenshot of inserting a linear trendline into a scatter chart while doing inventory forecasting
    
  9. Your finished graph should resemble this.
  10. Example of a scatter chart with a linear trendline to conduct linear regression inventory forecasting
    

» Inventory forecasting is just the first step. Here are some other tips to improve your Shopify store



3. Exponential Smoothing

Exponential smoothing predicts demand by smoothing out historical data, such as seasonality patterns and confidence intervals.

Follow these steps to implement this technique yourself:

  1. Go to the Data menu in Excel.
  2. Screenshot to locate the Data tab in Microsoft Excel
    
  3. Select Forecast Sheet.
  4. Screenshot to locate the Forecast Sheet function in Microsoft Excel
    
  5. Pick a suitable chart (e.g., column or line chart).
  6. Screenshot of choosing a chart type while conducting inventory forecasting in Microsoft Excel
    
  7. Select your end forecast date.
  8. Screenshot of setting an end period for inventory forecasting in Microsoft Excel
    
  9. Click Create to generate a worksheet with a sales forecast.
  10. Screenshot of creating an inventory forecasting chart in Microsoft Excel after inserting the necessary information
    

» For more accurate forecasts, consider your pipeline inventory as well

Streamline Shopify Inventory with Automation

Optimize your Shopify inventory with EGNITION’s automated solutions, featuring accurate forecasting, real-time syncing, and efficient management of out-of-stock products and pre-orders.




3 Tips to Optimize Basic Excel Inventory Forecasting

1. Customize Visual Data

Excel offers several customization options that you can use to optimize your inventory forecasting and avoid having to get rid of obsolete inventory. For example, you can tailor the visual timeline for specific ranges with color coding and other visual cues that make it easier to understand the data at a glance.

2. Choose a Suitable Forecast Function

While creating inventory forecasts in Excel, you'll be able to use different forecast functions to guide your forecast predictions, such as:

  • FORECAST: Predicts a future value with linear regression.
  • FORECAST.LINEAR: Has the same purpose as FORECAST, just for newer versions of Excel.
  • FORECAST.ETS: Used for exponential smoothing.
  • FORECAST.ETS.SEASONALITY: Calculates the length of a recurring pattern in a timeline to detect seasonality.
  • FORECAST.ETS. CONFINT: Calculates the confidence interval for a forecasted value.
  • FORECAST.ETS.STAT: Determines a specific value based on exponential smoothing forecasting.

3. Rely on Third-Party Apps and Templates

Finally, you can also leverage Excel's existing functionalities with third-party software and pre-made forecasting templates. You can simplify the whole process by using tools like Asana, Salesforce, and Monday.com or downloading free inventory forecasting Excel templates like this one from HubSpot.

A screenshot of Hubspot's template for Excel inventory forecasting


» Discover how bulk management could further refine your strategies



Why You Should Upgrade From Excel to Achieve Enhanced Inventory Management

After setting up a basic forecast in Excel, moving to specialized Shopify apps like Bestsellers reSort and Order to Discount can make your inventory management much more efficient. This software can:

  • Organize and analyze sales data: These apps can handle complex datasets easily, organizing and analyzing your sales data more effectively. This helps you build a stronger forecasting system so you can make informed decisions based on accurate, up-to-date information.
  • Automate repetitive tasks: You can automate important but repetitive tasks like sorting products based on sales data. This saves you time and ensures that your inventory is always organized in the most optimal way.
  • Optimize your stock levels: These apps can help you spot inventory that's not selling as quickly as you'd like. This way, you can create special promotions to clear out excess stock. By doing this, you can keep your stock levels in check and avoid the extra costs that come with holding on to too much inventory.
As your business grows, upgrading from Excel to specialized inventory software gives you the automation and accuracy needed to make smarter decisions and drive growth.

» Looking for a way to reduce inventory waste and optimize stock levels? Check out our best apps and strategies for managing your Shopify inventory

Bestsellers reSort

Automatically Sort & Organize Products

Organize and sort large inventory in your Shopify store automatically and with ease with Egnition's Bestseller reSort app.

Configure per collection

No-limits configuration

Sort by real revenue



Simplify Your Excel Inventory Forecasting

Understanding how to do inventory forecasting in Excel can help you make better decisions about your stock levels and ensure you have the right products at the right time.

But while Excel can be a valuable tool for basic inventory forecasting, it's clear that relying solely on spreadsheets can hold your business back as you grow. By transitioning to third-party Shopify apps, you can take your inventory management to the next level. These apps offer potent features that Excel simply can't match—from automated data analysis to intelligent stock optimization.

» Ready to streamline your operations? Take your e-commerce business to new heights by embracing the power of Shopify apps

Don't Know what Shopify is?

Start your own online eCommerce business using Shopify platform. Shopify gives you all the tools needed to make the journey easier, faster and more profitable.

Frequent Releases

We work tirelessly to deliver more value to your business. Our roadmap is largely based on the questions you ask. We listen and we deliver as often as we can.

24/7/365 apps support

You can reach out to us via a dedicated support icon in the apps. We're always there. Or simply send us an email with your questions at support@egnition.io

Pin It on Pinterest