Advanced Forecasting with Inventory Planner for eCommerce

[00:00:00]all right so uh i think we're gonna dig into it and get going so welcome everybody to this inventory planner session covering advanced forecasting and inventory control so hopefully if you're attending this you have a sense of using inventory planner you've done some sort of forecasting or inventory planning before we do have a session that covers more of an introduction to demand forecasting and introduction to inventory planner we'll share that link at the end just in case you would like to check that out have a refresher or share it with your colleagues that's a regular monthly webinar that we do you can also find it on our youtube channel so that one covers the basics this one we're going to dig into it and and really get into how you can control your inventory for better financial health and overall maintaining the inventory health of your of your company so that's what we're gonna cover today um just a little bit of uh super exciting housekeeping that we do at the top of every session so this is being recorded you'll be sent a recording afterwards so you you will get this as reference afterwards we'll also put it on our youtube channel so it'll be available there please use the chat the q a buttons available within the zoom window so just let us know at any time we'll answer those via text we'll chat you back and then we'll also read them over at the appropriate time so that we get them in the recording as well just for the benefit of people watching later and then as always we want your feedback and your questions we want to know what other topics you'd like us to cover in future webinars so we're going to have a poll actually at the very end of this session asking what other topics you want to go into for future sessions if we're not suggesting something that you want to cover let us know drop us a line put something in the chat we want to hear from you to find out what's most helpful so our agenda for the day looks like this first we're going to talk about establishing a baseline figuring out where you are now kind of doing a self-assessment i think this is helpful because then in a month or a quarter or a year you can look back and say okay here's where we started here's where things were and here's the progress we've made then we're going to get into more setting goals and planning figuring out where we want to be figuring out what those top priorities are there's a lot that that we can tackle but in the interest of using your time wisely trying to figure out what those top priorities are and then finally we'll get into some more forecasting so really refining the forecasting methods you're using an inventory planner some different tips and tricks that that we've seen in our own careers with planning and forecasting as well as what we've um picked up and seen from some other merchants since we talked to hundreds of merchants about inventory control so picking up some some tips and tricks there so um to get into it i'm gonna share our first poll here and get some feed back um we wanna know from you what is your biggest challenge right now with forecasting so so really getting out what was your interest in joining this session what do you want to tackle what's taking up your time what's keeping you up at night related to inventory we can't solve all problems so we're going to limit it to inventory issues here so do do let us know so we'll wait for for just a moment we've got the responses rolling in now all right so we'll give this another 10 or 15 seconds for people to weigh in all right so i'll share the results here so it looks like missed revenue due to stockouts is the top concern and then we're looking at being overwhelmed by data so we're definitely going to hit on refining forecasts so that you don't have those stock outs and miss out on revenue we're definitely going to get into some metrics and kind of where to start what to look at and then we'll we'll also talk about cash flow quite a bit and launching new products is definitely covered so we're going to hit on all of these topics but this kind of gives us a guide for what to emphasize but definitely please share your questions um if if you want to know more about something and we can go into greater depth so all right so we're getting into what is important to your business um so a few things that i want you to think about and and this is going to go to sort of your priorities as we get into the next section where we're setting goals and going into some planning so top one you know if you're thinking about cash flow do you have enough money coming in in order to pay your bills cover your expenses and make a profit do you have margins set up so that you have the fundamentals in place in order to cash flow positively as you're scaling your business another consideration can be your growth goals so what do you want to do as we head into the fourth quarter as we head into 2021 are you looking for an annual growth rate of 10 25 how aggressive is that growth going to be for your company maybe you have a natural growth trajectory and you're looking to see what you can do to really crank that up so having those goals in mind and figuring out okay what inventory do we need to have available so that we can meet those growth goals another consideration and and what can be important to your business is risk tolerance so a lot of times we'll get asked by merchants you know what's the right setting here or there can you just tell me the answer and and frustratingly the answer is it depends and part of this is risk tolerance so we talk to some merchants who never want to be out of stock they would rather err on the side of being slightly overstocked because they never want to go over out of stock especially of core items whereas we'll talk to others who are operating a very lean business they're fine with some occasional stockouts and so they're operating with just a lot less inventory and so this really depends in your business what that risk tolerance for stockouts and potentially missing some revenue is interestingly um you know stockouts we we often think of missed revenue but some businesses will actually use this to their advantage to create urgency um you know so grab the last 10 items now before it's gone this can be a marketing tactic but sometimes it's true that you just have a limited supply of inventory so occasionally we do see it working in your advantage to have a limited supply so this really depends on the business thinking about what your preference is there and then the last item to consider here is your brand value so if you are maybe in fast fashion or you're in a business where you're looking at doing high volumes of number of products selling high volumes of products so this could be for each order each customer coming through your store they have a lot of items per order or per cart compare that with a luxury brand that may be selling one higher priced item per customer so selling fewer of those but at a much higher price so think about your brand value this is important when we think about how you're marking up your items as well as discounting when it's been around for too long so a luxury brand probably is not going to want to get into discounting but there are some other kind of bundling or upselling techniques that they can do to move inventory out so keep all of this in mind as you're managing your inventory where your priorities are and how much you're getting into your store okay so um now that we've talked about kind of your current priorities where you're thinking about heading um let's think about what the current status is so here's where we're getting into a few metrics to take a look at right now to figure out what's the state of things so i think some foundational metrics to really think about our stock turn and gmroi which is gross margin return on investment so let's just break down what each of these is so stock turn is basically i'm investing in inventory how quickly am i moving that out how quickly am i getting that return on investment back so i put one dollar into my inventory i paid one dollar to my vendor i got two dollars out of revenue when i sold it to my customer how quickly are we doing that so are we turning all of our inventory over once per year per quarter per month you know how fast is that happening so that's a good one to keep an eye on especially if you're really thinking about cash flow we'll get into some other cash flow considerations then gm roi so gross margin return on investment this says okay we've covered our cost that we paid to our vendor what's that margin that's over and above that what's our return on investment so we spent one dollar on inventory are we getting two dollars or five dollars or ten dollars out in revenue from our customer what's that return on investment for my for my inventory okay then we're going to get into some more cash flow considerations so a couple things that that we want you to think about what is the value of your inventory right now both cost value and retail value so let's let's take a look at both of these so cost value this means what have you paid to your vendors that's the cost value for all the inventory that's sitting in your warehouse or warehouses this is something that you're reporting to your bookkeeper your accountant every month but also think about if it is uh let's say a million dollars worth of inventory sitting on your warehouse shelves that means it's not a million dollars worth of dollars sitting in your bank account okay so this is money that is tied up in inventory sitting on your warehouse shelves um then think about the retail value of that so we're going to get into this bazel's going to get into open to buy in just a minute but it's important to think about the retail value because if we have a goal of let's say a million dollars next month in revenue we have to have the inventory available so that people can spend their money on it we can't get to that goal if we don't have enough inventory available for them to purchase it so keeping in mind both the cost and retail value of your inventory your current stock is really important um you're also going to think about the the cost and the the retail value of any on order items so anything that has you've sent a purchase order to your vendor it is being manufactured it's on the way this is really important for cash flows so that you know where your current situation is what those bills are coming due this can be really interesting this time of year in particular where you're stocking up for fourth quarter but you don't have all the fourth quarter revenue coming in yet so think about that timing and we're going to get into that more with with open to buy then we talked earlier about risk tolerance where are we okay with some occasional stockouts where do we never want to have stockouts so we're going to get into this a little bit more with abc class what this means is we're categorizing our inventory a class are the highest priority items they're bringing in most of our revenue so think about this with the top eighty percent of our revenue the first eighty percent of our revenue is brought in by these a class items um then the next fifteen percent is b class and the final five percent is c class items so typically you don't want to run out of stock with your a class items you might want to put in a little bit of buffer so that you're not getting too close to stockouts there b class items you might be okay with an occasional stock out and then c-class items those can be items that that you're okay with some stock ads you could even look at eliminating those from your product catalog because they might be taking more time to maintain order store than they're actually producing for you so those are going to be kind of your first candidates for some product catalog cleanup so we're going to get into abc classes a little bit later as well how you can customize that with an inventory planner and use that tool and those categories for your benefit as well then finally brand value we talked about this a little bit so a couple metrics you may want to keep an eye on are how often are you out of stock so if you're creating that sense of urgency you might be okay with some stock outs if you always want to be reliable always have those items especially your core items you know you want to avoid those stocks so that's a metric you can check out and then look at your discounts if you're a luxury brand hopefully you're not discounting a lot if you need to move out trendy items or something that's been around too long then maybe you'll have some more discounts on those items so those are a few metrics to take a look at to get a sense of the current status of where you are right now and then you can keep an eye on those things as you're taking some actions that we're going to describe later in this session to really see what your progress is over time so now i'm going to turn it over to basil who is going to go into open to buy a little bit hopefully um you all got the announcement that we rolled out an improvement to open to buy just within the last couple of weeks um so basil is going to go through all of that as well as how to use it we do have a quick poll here just to get a sense of um what your familiarity is with open to buy um all right so basil i'll stop talking now and turn it over yeah is that what the cute okay i saw a little chat come on but i think that may have been the poll yeah i don't know just a yay from michelle perfect some real-time feedback i like it all right well you could see my screen correct yep let's talk a little bit about opentv uh jill gave us a really good rundown to help get a sense of where you're at today on everything um where where what is your current stock position how are you positioned how are your your great items your a items versus your your c items kind of getting a sense a calibration a self audit where are we now we need to figure out where do we want to be so that's one of the things that open to buy can be really helpful with um you're going to see on our left hand navigation bar a section over here to access open to buy and here we're going to show these results actually so here's looks like a lot of people have heard of open to buy but haven't used it so i have good news for you and i think a lot of our existing users could really benefit from open survey we just haven't heard too much about it yet so this is reinforcing um this is this is a really great tool just to kind of help with your cash flow planning based on planned revenue goals and based on your goals uh for for your stock cover going through the year i know we had some some folks mentioned earlier just uh cash flow management being a really important part of the business uh decision making so to that point let's let's talk a little bit about how open to buy works now open to buy it's separate from forecasting and replenishment and what you do in open to buy should ultimately inform the way that you decide to purchase and how you ultimately kind of manage your forecasting and replenishment settings but this is a great place to start now it's a more advanced tool but in terms of like a macro strategy this is a great place to go to kind of get a sense of what is this revenue gonna look like and and what is my coverage and what does that mean that i need to purchase in order to support those goals so here we are i'm in our demo still right now and i came to open to buy and i'm just going to go to one warehouse to keep it simpler also because our revenue is so great here in the open to buy so i'm going to go over to our shopify one or our shopify warehouse it gives us a slightly more manageable kind of numbers here all right so the first thing that we're going to do you're going to notice this says default here so we can create different plans and open divide we can so i'm going to start by creating my own plan just a new plan all right so if i hit new plan at the bottom and i'm just going to call this basil's basils how do i spell my name basil's plan all right so we're doing this for one warehouse we can create different plans related to different warehouses now i can also choose if i want to do top down planning or bottom up planning now planning ultimately is going to happen either way actually at the category level if i were to click bottom up planning here notice it actually opens up my inputs at the category level if i were to do a top down planning it allows me to put in my plan revenue and cover goals at a total level but what it ultimately does is if i try to set um say if i set planned revenue here it's going to trickle it down to the court the categories based on on revenue breakdown by category and if i try to put in a forward cover goal as you'll be and we'll come back to this so you can see exactly how this works but ultimately if you set a forward cover goal we're actually just going to try to set it for every single category but we're going to check if any specific categories are currently overstocked in which case we wouldn't recommend open to buy for that category and we look at the next quick category do this over and over check if there was overstock and recalculate back up to the top so for that reason i'm gonna actually choose to do my my plan as a bottom-up strategy so you can see what this really looks like for one specific category and then it'll kind of make sense what we're doing for each category if you were to do that using a top down plan all right so let's use bottom-up planning now the first thing we need to do as part of this plan is say okay what is our planned revenue goal okay so i'm going to hit actions down here at the bottom and there's a couple things i want to point out here first i'm going to look at our category organizer so this is just you know when we do kind of when we roll back up to this total level and maybe i just want to get rid of some of these categories that you know that are just sort of catch all categories i don't necessarily need to do so much planning for these right so let's say for food i don't need to keep men's in here and i'll apply that so this will this will kind of recalibrate and just focus in on the categories so that's often attached to your product type in your system so um you know in our in our shopify store this v product type is ladies versus addresses now if i came to the other parts of the tool so say i go quickly just reports inventory kpis and how we can break down our reports in a whole variety of ways so one of those options would be categories we can also do kind of different reporting analysis and say hey look at the last you know 365 days in my stock and my sales etc so that's what we're looking at here over an open survive go back to basil's plan and go back to my shopify warehouse so we kind of organize which categories we want to focus on at the location we want to see and now i need to input my planned revenue goals so what i'm going to do is i'm going to seed my revenue from the prior year i'm going to say you know we're going to actually do a 10 increase this year in our revenue so that's what i want to plan according i'm going to make sure that i can support a 10 increase in my revenue now you see that inputted automatically right now actually it went back to top down so i'm just going to do bottom up we can always switch between them within the same plan which is nice but i want to focus in on a specific category because it's easiest to see the behavior when you're in a specific category like this so now actually you can see here's my planned revenue here's the actual revenue kind of so far um now if i were to grab this gear icon in the top right we can add in other metrics to this table so if i want to see my actual revenue for example last year or last last year this would be two years ago okay so we could see for example to to set ourselves up for our our october we need you know last year we did 78 000 in sales and the 10 increase would mean 85 949 so that's how we're gonna actually seed in our planned revenue here but we can add those in as like a baseline to kind of make sure that it feels feels good it feels realistic but just for the sake of not having too many columns in here i'm just going to reset it so we can kind of zone in so what does all this mean here all right so i have my i have my planned revenue goals here and i'm just going to put one into we'll say for for september it's going to be around 80 000 here um we're catching the actual revenue so far this month so now the next piece that's really critical is just getting a sense of our our forward cover what this means essentially is we're going to see you know what was our you know we closed the month of august with 63 496 in terms of stock and we opened up september that way one really really important piece in here is understanding that everything you're looking at is in retail dollars so we're actually checking what the stock was as of september first at retail value so we took all your stock times the selling price and then we we're gonna display it here at retail dollars it's all it apples to apple's comparison so it needs to be at retail dollars to make sense and then we'll input a margin to give us an open to buy at cost and i'll show you what that looks like but let's say so you know based on september i'm kind of coming into the month of sixty three thousand four ninety six in revenue well our plan revenue is really high here um so basically oh actually and i think that's why it was just showing us kind of the remainder so let's say our actual let's say you know we're right now it's based on this analysis if our opening stock was 63 000 496 and and we were selling through it hot you know maybe it's actually not going to be quite this high i'm going to say 30 000 for september and then we expect it to pick up in our upcoming months so all right so we're going to end the month you know it's still going to be pretty pretty lean here actually it's just looking at our overall revenue and so the main thing we need to do really is just kind of understand how do we want to enter the month of october and i think it's a little tricky because it's the last day of september so it kind of it's going to look a little funky here but the the thing that we really want to make sure we understand is how do we want to enter the month of october would drive our behavior for the month of september and it's going to look like that for each month so if i want to enter the month of october with enough to cover me through the end of the year say october november december i would do three months all right so if i save that in it's going to recalculate so it's actually going to say okay this we would still need to buy this amount in the month of september we're going to do it real quick it's the 30th but if we do that we check our opening stock against the reven our revenue for the month what's kind of been actualized in terms of our sales and then what additionally we need to buy if we also had anything on order or if we received goods we'd see that here retail value we're going to pick that up from pos so we can see for example we have some orders that are scheduled to come in october november we convert it to retail dollars and we're going to consider it as well as part of this to see what's already on order and what's left to buy but if we buy another 227 at retail we're gonna enter the month of october with 261 thousand well that is enough to cover 85 85 plus 90. if you were to add all that up together what it what do you get so 85 plus 85 plus 90.

[00:24:02]it's gonna give us that 260 obviously i did some rounding here it's going to show you it would make sure we enter that month of october with enough to cover our needs for three months so if if i wanted to maintain that cover i would just do that i would make this three now why doesn't this just say two right i mean we sold through one month we should end and it should have exactly two months well we already have some purchase orders sitting out there when we consider that even if we don't buy anything in october we're still gonna come to november a little bit up but maybe my goal is actually to maintain three months of cover all right and i would just put another three in here we save that in well now we get a reta an open to buy amount for the month of october to make sure we can set ourselves up for november to cover november december and january and so on now with all that in mind we'll say that's great i know now what i need to buy in october to maintain my goals going into november to meet this 10 increase in my revenue and my margin is a 65 margin so what this is going to do is we're going to calculate open to buy at cost based on that margin value this would tell us as long as you buy another 29 647 in the month of october and you receive it in the month of october then you would end the month so that you'd set up november 1st with enough to cover you november december and january now if we go even a step further here if i were to grab that gear icon at the top once i add in my average selling price okay so let's say i'm selling um my i'm also going to add in open to buy at units so this is another way we can convert that even further to say all right if we're selling our ladies uh items at an average of 15 then we're gonna actually buy that out and say okay and this is roughly you're open to buy at units for the month of october so it's just different ways of converting down from retail to cost into units because everything else otherwise is going to be here retail dollars now if you were to try to put in an impossible number what happens okay so let's say you know i really this isn't that great of a category i want to be kind of careful with my inventory so let's just kind of go in you know to the end and i'll say i want to go into october and you know i'm just i want to grab i want to grab a category here with a little more overstock right so let's let's let's check one out here actually there's not a ton of overstock here let's just say i tried to make it zero let's say i'm like planning to zero out the category well it's not possible we know that this is going to give us a warning or an error here and it's going to immediately oh recalculate for that overstock it's saying hey you know you opened up the month of september with 1.39 and you sold through all that and this is the lowest you could possibly have for october right so if we try to do that at a higher level essentially or let's say we did three months here okay for ladies so now we get you know much bigger open to buy in september to set us up for october well i mean i can't suddenly make it a one month cover for the next month because i've already got all that extra inventory in the prior month so we're going to recalculate with this in mind all right now if i were to do that back at the top level that that we're gonna just try to repeat this for every single category so i could say all right let's set ourselves up going into october with a three month cover what do we need to buy in order to meet that amount if we buy the 227 it sets us up with 628 000 covers us october november december that's great if i try to say all right across the board you know i just want one stock going into november again it's not going to be possible but we're going to try to set an uh stock cover of one for every single category and then it's not going to be possible we're going to get a little summary here it's like actually you know some of these categories are currently over stocked we can't set it for one for november but for the categories that we could there were some that it allowed us so but for those we recommended a little open to buy and then we're gonna recalculate it's actually gonna take you back up to 2.163 so it actually did set it for for some months it let us do kind of a lower cover and if i were to scroll down we're going to see that behavior for every single month for every single period and it would have recalculated for the months where it needed to and it's going to roll it back all the way up to the top um based on based on reality essentially so if you do it at a top down level we're just going to try to set that level for every single category check if there is overstock and then recalculate upwards as we need to um so that's a quick kind of nutshell on what's going on here with open to buy and um yeah i mean basically from from this point uh you know we're gonna figure out how how does this tie back to forecasting once you kind of have a sense of you plan like where you want to go based on your revenue goals and you kind of adjust this or you're doing it here at the category level one by one by one so how do we use this information and actually inform the way we're going to forecast so i'm going to let jill kind of talk just a little bit about just just so some core information that's really important to understand about forecasting and then we're going to link right back to open to buy to talk about how you can take this information and then go back to forecasting with all of this in mind all right sounds good we have a question maybe you want to jump in on this it's related to open buy so um esther is wondering what's the difference between spot cover and forward cover great question and for our existing users actually this is um this is a big big difference uh to how it was before so spot cover is actually looking at your planned revenue for the same month so let's say like november for example and ladies we're actually gonna sell 300 000 in november like let's say this is really driven by holidays so i'm just going to put some bigger numbers in for november december and you're going to see a big difference here between spot cover and and um forward cover now the main difference is so let's say i want to um let's say i want to i want to cover four months in november actually in this case all right so notice spot cover became really high for october well i want to close the month of september with enough to cover me for october november december that's three months of cover spot cover looks at just the revenue for that month so it's kind of i think on the spot so today it's like your current cover if you were to take six three six hundred and thirty five thousand that's really high in comparison to just october's revenue it kind of it doesn't know what's happening with november december and this is actually the way up until a couple weeks ago we you planned based on spot cover and you kind of had it made it a little more confusing we added forward cover as a way to say okay to look at what's happening in the same month with the upcoming months as well to make sure we're planning accordingly so it's actually a much more straightforward way to plan but we calculate instead that spot cover automatically so instead of inputting in spot cover we added forward cover you plan based on forward cover and you just calculate on your spot cover instead awesome all right we have another question about um oh the questions are rolling in this is awesome so uh maybe a clarification on this one from from esther so if you always want to have three months of inventory on hand your forward cover has to be three all the time yes that's correct yes you just keep you would maintain a three-month cover as you go along it would make you to keep it around there all right sounds good michelle has a question about uh what happens if within one category the average price differs greatly so we worked on open to buy at retail then then added margin to get to cost then average price to get to units but what if you know that average price is kind of all over the place what do you suggest in that case yeah no it's a good question um i mean so we're going to plan ultimately at retail um you're going to be able to convert that using the margins of the cost and then using the selling price we could also convert to units but it's going to be an averaged amount um this is supposed to be an approximation this is a planning tool to kind of get get a sense what do we really need to buy and if there are big differences in terms of the selling price in terms of the margins that's where we're really going to need to dig into the forecasting and replenishment piece right um now we also introduced a really cool new feature that we're going to be announcing and you are the first that are going to be hearing it today um you'll notice and we're going to dig a little deeper into this in a moment but in our ed basically once we talk a bit about forecast settings we're going to be able to take this information and input it you know say we set up our baseline forecast we get everything kind of in order the way we want uh maybe oh yeah it's actually it's not even in our in our real story yet it's just our pre a production environment but what you're you're able to take essentially like let's say we went into this edit forecast section and we roll it up by category well we're gonna see like an addition of all of our past sales say in dresses here's all of our past sales all of our forecasted sales all the way up and say okay you know with our plan in mind i recommend you know we're saying we're expecting to we're forecasting to sell 2 500 units so we could do an override for the forecast at a higher level and trickle that forecast down to the individual skus that are part of the category well we're introducing a new feature where you're going to be able to do this with your forecast revenue i'm really excited about this i'm going to take over your screen while you're talking about it okay carry on but i'll show i have it pulled up here all right so as as basel said um this is something that is not live on your accounts yet it will be soon we're we're still debugging it a little bit but uh it's close um so we wanted to give you a taste of this because we think the people attending this session uh today are going to be most interested in this um so about well maybe you want to just pick up with like okay we've done open a buy we've got this information on how much more inventory we need what does that look like here um so you said you know we can come into forecast override what do we do with that information at that point yeah so i mean basically depending on how we set up our our planned revenue and open to buy um you know there's going to be a really key piece here just related to your forecast settings um and just getting all that in order because ultimately um so you know maybe we could talk about your forecast settings for a moment and that and then come back here because really understanding the forecast settings is going to be a really critical piece here okay so when you think of your forecasting and replenishment analysis you can think of it like a three-tiered wedding cake essentially right so where the first layer of of this is we have to come up with the baseline forecast by skew and the way we're going to do that is we're going to look at your past sales information i'm sure many of the existing users you you looked at this a billion times over and over you could use a recent sales and trends method where you zone in on a specific period of time look at the last six months and make that the baseline of my forecast and kind of catch those recent trends um maybe we need to to zone maybe we're using a seasonal forecast method however you ultimately set up your forecast method it's going to tell us okay here's how we're going to look skew by skew by skew look at what's happened in this particular period and use that as the baseline for the forecast so in here for example we're using a recent sales and trends method we're going to try to go back to september 2017 or we can change that period or otherwise we're just going to start with the first date that this sku sold and use that as the baseline for the forecast and we're going to check if there's been a repeated behavior in the last two months so that's a recent reactiveness measure to trends if we saw it increased in sales for two consecutive months we're going to start to incorporate it if we lifted that number up it would be less reactive to those recent trends so there's many different ways you can really zone in and get your forecast methods perfect let's say you brand brand brand new items you can't keep it on the shelf the last sales method there for example would say hey look at the last 14 days or the last 20 days whatever you input here and make that the baseline of the forecast to be extra reactive now we also have a seasonal method it would look at the same time period in prior years it's great if items have plenty of history we have top down method if the item itself doesn't have a lot of history but let's say the category this is part of it's part of dresses dresses has plenty of cat plenty of history well we'd create a seasonal forecast for dresses overall and just give a certain amount of that forecast to this item based on recent revenue within the category kind of distribute that proportionately to this item whatever forecast method you choose now you set up your default method every sku is going to start with that you can customize it by sku so you could say a certain subset of items we're going to use a recent sales method these we're going to use the last sales method these we're going to use the seasonal method et cetera et cetera okay we'll dig a little into that as uh later as well but let's say you set up your forecast method you feel pretty good we're using our recent sales and trend method here so go back to edit forecast if you could for me joe now we can take that information and say okay generally that feels pretty good the way we're gonna come up with our baseline forecast like that feels pretty good but we we're gonna have some expected adjustments so we could come to this section of the tool and say all right you know that's fine for the baseline forecast but in in the reality is in november we're we're doing a big big special this year now actually if you could do it on dresses um just put in you know whether we we could do it based on units we could do it based on revenue say our planned revenue we're actually gonna make it eight hundred thousand because of a big sale we're planning to do well great that's what this this functionality is gonna do you could do it in units today but soon you're gonna be able to do it based on forecast revenue so we'll give you a little warning here and now what we're going to do is we're going to override the forecast the automatic forecast that was calculated for november by saying you know address is actually going to sell around 800 000 now we're going to look we're going to distribute that forecast down to the individual variance and it's going to round up a little bit just because every item ultimately has a different price so when we distribute that forecast down and multiply it back out by the price we can only get so close to perfect it will be around 99 there so you could take your planned revenue goals um as well and you could you could do forecast overrides using those those planned revenue goals by category um and then essentially yeah you'd see here that we're gonna we're gonna override that those forecasts it's gonna say hey here's what the original was here's how we over how we did the override and then you can take this information back now you have your forecast method in place you put in your overrides on the forecast and now you can dig into replenishment and say cool what is my lead time if i'm going to place a new po today and it's going to take you know 15 days to get here and i want to cover my stock for x amount of days well your forecast is already in perfect order based on your plan revenue you know how much you ultimately need to buy so you put in your lead time your days of stock goals and replenishments and then you're able to start creating pos and kind of scale it to say okay i know that i can buy 40 000 this month in this particular category and you can kind of really fine-tune your your po creation as you get there into replenishment so this really this new features is kind of connecting the dots um with the new open to buy feature is taking that planned revenue and being able to pop it back into your edit forecast area so when you go back into replenishment it'll inform directly the way that you decide to buy um i know we have a few extra questions here so yeah so just to clarify on that point that you were talking about esther's asking about this too so the numbers from open to buy will not automatically populate in the section that we're looking at with edit forecast you'll need to put that in at this point but this is some additional functionality that we're looking at where you can do that forecast override by revenue that's what's new here it used to be only units um so it's it's helping to connect those dots and make sure that your planning that you've done for your revenue goals is going to tie in and be affecting your forecasting and kind of what additional inventory you'll need as well so yeah we have a couple other questions in here um so michael just to clarify forward cover includes current month or starts next month it includes this month i want to go into the month of october with three months of cover i have to cover my october november and december revenue it's always going to include the current month uh connie if your supplier takes two months for processing and shipping you want stock for two months what would you use for forward cover good question open to buy what's what it is a little tricky because an open to buy so let's say you're putting in your your your planned revenue and your plan and your ideal forward cover for the month of october so we give you an open to buy amount for the month of september well whatever we give you for open to buy whether it's open to buy at retail open to buy a cost i'm going to buy units you have to think of it as the amount that should be received in that month to set you up by the first of the of the next month to have you that with that cover so like if you put three month cover for october and we we're saying okay by x amount during the month of september receive that in so by the time you get to october 1st you have three months of cover so you do have to take that that the lead times and everything in mind say if you were doing like you're working on your open to buy for the month of december so you're getting open to buy for the prior months well that's what should be received in those months so you're gonna have to work uh work backwards a little bit to figure out okay when do i actually need to place the order to make sure it arrives then by 30 000 open to buy in december but it takes two months to get that stuff well i got to make the purchase in october so that it lands in december hopefully that helps to clear that up a little bit all right i think you answered the last question here john okay cool sounds good sounds good so um in the interest of time we're going to focus on a few key things that you can do to help improve your your financial health um you know related to inventory for your company so we're gonna get into a few things here but as always um you know feel free to pop in with with questions we'll be sure to address those um and then hang around for the end we're going to be asking you what additional topics you want us to cover um open to buy is one of those so if you want us to do a whole nother section a whole nother webinar related to open buy you know let us know that too so hang around till the end for our last poll so that we can find that out from you so a couple of things um that that we'd like to hit here so uh we did talk briefly about abc classes before you know so that's a way to categorize our inventory so i just want to walk you through if you haven't already found this how to customize this within your account so if you come to account and then settings and then we're going to come over to forecast then all the way at the bottom here this is where you're going to find your abc analysis so you can see the defaults that the system has in here you can change these percentages you can also change the the reference period so for example if you have very seasonal items especially as we're heading into fourth quarter it might be good to look at the last 365 days so that you're getting that performance from the last fourth quarter and you can really see what those top items were heading into the fourth quarter as well and you'll have those those classes that reflect that so that's that's one thing you want to think about here typically people will use this as a revenue based item but if you want to look at units sold you do have that option here so that you can see number of units sold so that's the sales metric within inventory planner and classify it that way instead of by revenue so those are some ways you can customize that then when you're in reporting or you're here in replenishment there's a few different ways that you can see this information so one you can add it as a column so here we can come in and look at abc classes here we're going to see this represented you can also see this with filters so i do have some some presets here at the top but also we can find here's class so this is what's what's referring there um you know and maybe i just want to see a class or i want to see a and b class so i could show that here so i can select those and then i'm just looking at the top 95 percent of my items that c-class is excluded so obviously a couple different ways you could set up that filter there but those are those are ways that you can use that as a tool another tool that you have to classify and segment your inventory are ip tags so inventory planner tags so you can use these if there's not a good category or way to view the items that you need just straight out of the box so categories you know will be a really common way to look at your items grouped or by vendors those are really common but maybe there's there's another way that you want to see them so you can view by ip tags and you can assign these here using bulk actions so we can select items here we can come down to the bottom and add our ip tags now one thing to be aware of that by default ip tags will apply at the product level so if you've selected the green dress it's also going to apply to the blue dress and the red dress okay anything that's within the same product so the parent child relationship get a hold of us you know contact us down here in the chat within your account if you want that applied at a variant level instead so then only the green dress is selected we can update your account settings for you so one really important thing to be aware of as iptags are used by default versus some configuration that's available too so um those are iptags that's something available just within inventory planner it will not push to your platform um you may also see based on your platform tags so there's tags and ip tags tags are coming in from your platform so for example shopify users will see that so you can have both of these but iptags are nice because in some shopify themes those tags are going to be visible to customers and you don't always want them seeing what those tags are so you can just have something within the system here to manage your inventory um so that's that's one thing that you can be aware of there let's get into a couple other things you know that you can do to improve the the inventory and the financial health um of your um of your store so one of those is taking a look at stock turn so this is this is one of those metrics that we looked at at the top that is a good indication of okay how quickly are we turning over or um bringing in and then moving out our inventory how quickly is that happening so a few different um things to take a look at here um in terms of forecasting accuracy one of these will be to take a look at stockouts now considering stockout history is a really fundamental and foundational idea within inventory planner hopefully everybody on this session is aware of this but i would um it would be a massive oversight if i didn't mention this because it really affects your forecasting accuracy a lot um so let's talk through what this setting does to help improve your forecasting accuracy so i'm here in account settings i came over to forecast we're talking about this setting right here use stockouts history it's enabled by default what this means is what we're trying to get to with your forecast is how much do you sell when an item is available and what this indicates is when you run out of stock the item is no longer for sale so if you do allow overselling then you'll want to disable this item and that does two key things one it affects the sales velocity of your forecast so with this enabled we're looking at how many days were you in stock during that month and then how many units did you sell over that time or um if you're using the last sales method you know we're looking at the last 14 days but we're going to look at the last 14 days in stock so your last 14 days in stock could have happened over the last 90 days we're going to go find those days when you had stock and see how much you sold during that time so this is a really key consideration if you have this disabled you are you do allow over selling as i said this will affect your sales velocity so it looks at the rate of sales so forecasted demand but then also it looks at replenishment needs so with this enabled we assume you stop selling at zero stock but if you allow overselling then the forecast needs to know that you're going to continue selling even if that's during your lead time when we normally think okay there's nothing to sell so don't take that into consideration we do need to know okay you're going to continue to sell this will add to the replenishment recommendation so please be wary of this as always this is your account setting your account wide settings you can make exceptions for a few key items you can always come back to replenishment use your bulk actions and set exceptions to your forecasting methods and settings here but that's just a really important and foundational idea within inventory planner another key piece of information is that inventory planner on your first sync does bring in your sales history your product information we don't have a way of getting your stock out history as of that initial sync with your platform but we do accumulate that over time so this stock out history will apply as of your account creation date or the date you're connecting um a particular platform so be aware of that if you do have your stock out history available in another system you can import it to inventory planner that will help with your forecasting accuracy okay another um idea that we want to get into with forecasting accuracy is days of stock now hopefully this is one of the very first things that you took care of in your inventory planner account in setting up your days of stock this indicates when you place an order and that new order arrives how long do you want it to last so thinking about this this is also your planning period or your ordering frequency so this takes a look at um oh sorry i've gotta here we go okay um so um you may ideally want to order every 30 days as an example okay so that's going to be your purchasing frequency that's how long you want your inventory to last here for those a class items or your highest priority items those core items you never want to be out of stock or you want to plan due to shipping problems that we're seeing i think worldwide right now where supply chains are pretty unreliable or your supplier you need a little buffer worked in here um we suggest using the days of stock field so we we are frequently asked about safety stock there is a safety stock field we we don't encourage using that it is better to use days of stock so let's say i want to plan for 35 or maybe even 40 days of stock as my buffer here's why this is better if i set my safety stock at 100 units but i see tremendous growth within my store right if everything's going well we're going to see a lot of growth that 100 units is not relevant anymore because i'm selling so many units it doesn't provide a true buffer however my days of stock is tied to my stock or my sales velocity so it's always relevant to what my actual sales are right now you're not going to have to go back and maintain it and it's going to be relevant um to to how much you're selling right now so that's why using days of stock is good to create that buffer now there's another interesting um consideration with days of stock so we talked at the top about you know keeping an eye on what your inventory cost value is your stock cost is so this is again the the cost value is what we pay to our vendors and looking at this overall so one great success story that we saw with one of our merchants was they took a look at what their stock cost was and let's say it was at five million dollars okay they're high velocity really trendy items they're going through a lot of units and they they saw their stock cost was at five million dollars and they said okay well that feels like a lot of money that's really tied up in inventory that we we don't have that money in our bank account right now to invest in marketing or invest in our most profitable productive inventory so what they did is they actually lowered their days of stock so let's say they started out at 30 and they dropped that to 25 or 21 days what that does is make sure that they're running a leaner operation um they have they were able to drop their stock costs by a million and a half dollars within six weeks so really rapid results for what they saw um this does mean operationally that you're going to be placing a lot more purchase orders that are smaller and you're going to be placing them more frequently so there's there's an offset in terms of you know how on top of it are you with your purchase orders placing these um absolutely when they need to so you don't run out of stock this approach is not going to be right for everybody it could be that you have high shipping costs per shipment from your vendor in which case you're not really saving any money because you're adding to your landing cost so it is not always the right move for everybody but if you look at that overall stock cost and it's it's too high you're tying up money you're looking for greater liquidity better cash flow this is something to consider can you operate a leaner operation less inventory on the shelves but ordering more often so you're lowering your days of stock here okay i know we're getting really tight on time here so i just want to hit a couple other things we spend a lot of time on replenishment and forecasting getting in new stock avoiding stock outs please don't forget about reducing overstock it's it's far less sexy and exciting than handling replenishment but in terms of improving your stock churn and your sell-through rate um this really can have a huge effect so um when i was a merchant we were able to improve our stock turn by 8x so meaning we were moving inventory through eight times as fast and a lot of that was due to getting rid of overstock we just had stuff sitting around forever um and it's gotta go um and so it's not earning you any money sitting in your warehouse get it out get something out of that inventory so that you can invest it and and be more productive within your store hyper speed tip on this deck and sorry if you already mentioned this but we have a free connection with google analytics if you were to connect google analytics for free in your account settings uh it'll show some labels you can see on the right you're gonna get some information that's saying hey this is a new product that's possibly why it showed up on here you'd also see some labels about page views and conversion rates so you might kind of get a sense oh why is the conversion rate so low here cetera so that's a free connection definitely suggest including that and then you'll be able to also add those columns page views and conversion rates to your kpi reports and your replenishment table as well yeah awesome tip thank you so much all right um so we just have a couple of minutes left um so i'm going to share our last poll uh while we are going through kind of new product launches here um so let me launch this poll here um so we're gonna ask you about what topics you want us to cover in the future and while you are answering that just wanna briefly touch on new product launches um and and obviously there's a lot that goes into this but a couple of tips that we can share with you so within your inventory planner account if you come to reports and then assortment this is my favorite place to go to get a sense of okay it's a new product we don't have a sense of you know how this is going to sell but think about what do we already sell that's similar by category by vendor by tag what what's in common with this item so here in assortment you know i can look at my different performance by categories i could come in here and filter by vendor i could bring in tags so we're narrowing down and looking at that performance for existing items what people have already spent their money on to get a sense of that another great thing that you can do in the assortment report here is come to options sets so these are any of those drop downs on your product page color size flavor any of those kind of drop downs and you can see what the performance is across those different items so here we're just going to quickly come into color to see what our performance is here and here we can see okay we're bringing in the most revenue from silver and again i can bring in my filters and look at okay within one category within our dresses what does that performance look like and that can help with that initial order that you're looking at there um i know that we're almost out of time basil do you want to just walk through kind of um some other new product um tips that you have as well yeah sure um feel free to end the poll at any time we can keep it going here and we have a few more that are kind of trickling in okay but i love the engagement on that that's great okay so i'm gonna move hyper speed on this one all right guys uh so something to keep in mind with um oh yeah let me show you my screen here we go okay um all right so thank you for everybody again for participating in that poll so let's say with product uh with product launches and just talking about forecasting especially uh we've run into this with with a handful of customers recently who are bringing in a lot of new products so i want to show you just a couple things real real fast here um so one especially if there's a lot of seasonality so one feature you're gonna notice and i'll show you just here for one item as an example if i were to click into this details icon not only can we customize forecast settings by skew if i were to turn on custom settings and change the method as we discussed earlier but you know all of these methods really are only as good as the history that's available so what's really important if you're bringing in a new item this combined sales stock feature allows you to copy history from another item over to this item so let's say you know this item this new item we're bringing in performs kind of similarly to this item it does about you know 85 percent as well so we're going to copy 85 of those sales over and then we're going to stop combining the sales after a certain date because we'll have enough history on the new item to use it for forecasting this can be really useful uh for for a new product launch especially if there's no history whatsoever we would suggest using this combined sales stock stock method and then stopping that combination after a certain date once you can use the new history i would recommend that for anything that has like no history whatsoever if you have a pretty seasonal business something you might want to consider here so if i were to go back to my replenishment table and i'm just going to quickly add a column here it's the age column this tells us how old items are so one thing i might do for example like a top down method we talked about earlier is a great way to get a seasonal forecast for new items but we want to have at least 60 days of history ideally because what we're going to do is check how did this item sell in the last 60 days as part of that category and create a seasonal forecast using the seasonal behavior and give a certain percentage to this item based on those last 60 days so we can use this to say all right you know i'm going to grab anything with um let's say age i'm going to add my age and days filter anything with 60 to 364 days for example with that much history great so it's gonna it's gonna just limit down to those items and these might be items that i decide let's grab all of them use bulk actions and set these to a top you know override the default and use a top down a method because i have enough history but i don't have a year so this will give me a good seasonal forecast for anything kind of in that in that ballpark um anything under 60 days if i change this filter we go 0 to 59 this would identify anything that's so new that you might want to use that that combined sales stock feature for these items until you have at least 60 days and then once you have at least 365 days and then you know until whenever these we could use a seasonal forecast because we have plenty of history for them for these items at this point so um since we've seen a lot of that and in recent months so i wanted to mention that quickly as a method for handling new product launches as well okay um do we have anything else we do have a couple questions here uh yeah so i was just typing in um some some things there so just a couple of links in the chat um i've put the registration link to our intro to demand planning and using inventory planner uh webinar so that links in there you can share with your colleagues i also put the link to our youtube channel um we did have a question from kaylee about if the session will be emailed yes this is recorded it'll be sent to you within the next couple of days um so you can you can check that out uh mariah yes we also had a question from you about age you can always check our glossary of terms you're going to find it there's a chat widget at the bottom right of the tool um as i'll just quickly show you here so if i were to go to that widget hit glossary of terms and then we just check that out so if i just search age it'll tell you actually here's the length of time since the first order date if not if there's no sale then we're going to use that created date instead um so that's that's the way that you can look at that as well but anytime you have questions about columns or filters always recommend checking out this glossary of terms it'll really dig deep into those explanations awesome all right so um we'll be emailing you a link to this if there are other questions that we didn't cover in this session please feel free to reply to our email we'll be glad to get back to you um as always we really appreciate your participation let us know what other topics you want us to cover in future sessions um and we really appreciate you joining us today so have a great wednesday everybody thanks all take care