No customer wants to see the perfect gift float by in their feed, only to come to the purchase site and see that it’s out of stock or backordered and not shipping until after they need it. For most ecommerce brands the holidays are the most crucial time of year to get an accurate forecast of their projected order volume.
No matter how much you incentivize customers to shop early for the holiday season, it’s inevitable that most shoppers will have last-minute gifts to get. This means the highest peak of your order volume will likely be in December, and you need to know that you’ll have inventory to fulfil the spike in customer demand.
What is an Ecommerce Forecasting Model?
Getting an accurate projection of your holiday order volume requires forecasting. There are many great forecasting models you can follow, the one that works best for your brand will take into consideration the type of product you sell, how it is made, historical order volume data, plus any sales or promotions you plan to run during peak season.
It’s impossible to predict with 100% accuracy what your order volume will be. A good forecasting model will use data from prior holiday seasons, plus the year-over-year growth that you’ve seen. Consider any trends in the market, for example, travel accessories weren’t on many gift lists during COVID-19 pandemic, but sweatpants were. This means using a combination of demand forecasting along with sales forecasting.
If you are having trouble getting an accurate forecast, reach out to your fulfillment provider for help, they are experts and can quickly help you improve your inventory forecasting.
While most ecommerce businesses think about forecasting for products, there are other aspects of forecasting for the holidays that are just as important. Here are a few less common ways accurate forecasting is important for a smooth holiday season.
Ecommerce Holiday Shipping Guide
A free guide with tips to increase average order value, plan perfect holiday forecasts, limit shipping delays, and navigate demand surcharges.
1. Supply Chain Partners Need to Know
A solid forecast will do you no good if you haven’t communicated your projections to your supply chain partners. Everyone from your manufacturer to your shipping carrier, to your fulfillment provider, needs to know what to expect so they can adjust and plan accordingly.
Consider the cost and capacity needed to store and move your volume of products. If your fulfillment provider doesn’t have an accurate forecast from you, they may give storage capacity to another vendor, leaving you without a place to put your stock. Same goes for shipping containers, share your forecast with shipping partners too.
The importance of communicating your forecast is not just to do it once, you need to share changes in real-time. Update your forecast often based on the market, and customer activity leading up to the holidays. Only with a realistic understanding of your projected order volume will your fulfillment provider and supply chain partners be able to let you know what is feasible regarding daily and weekly output.
Without this clear communication your 3PL may fall behind on order processing and customers might not get packages in time.
Insider insight: Throughout most of the year most ecommerce brands rely on a reorder point formula to always keep a steady amount of inventory in stock. The holiday season operates a bit differently. There may not be time to reorder during the holiday season to ensure customers get their packages on time. This is why accurate forecasting is so important.
2. Your Products Need Packaging
If you have a full stock of products, but not enough right-sized boxes to ship them in, that’s a big problem. Ordering more will take time, delaying shipments, plus using the wrong sized boxes may slow down fulfillment and increase shipping costs.
It’s even more important to match your forecast to your packing materials supply if you have any specialty packaging you intend to use for the holidays. This includes custom box tape, stickers, tissue, or branded boxes. Even if you aren’t planning to use any specialty boxes. You still need to make sure that you’ll have enough packaging materials to get all orders out on time.
If you partner with a 3PL, once you send them your order volume forecast, they’ll do the work to make sure they have all packing materials in stock for all of your products and any specialty fulfillment projects. By updating your 3PL often about any changes to your forecast, they’ll be able to respond in a timely manner, and you won’t be scrambling at the last minute.
3. You Need More Labor Support with More Orders
Order velocity will increase alongside order volume during the holiday season. Getting your forecast as close to accurate as possible will help you determine how much labor support you’ll need to process your orders. This is the case no matter if you fulfill in-house or outsource your fulfillment.
This is where sales and promotions will be the most important to note. If you offer limited-time sales for special holiday bundles or discounted shipping, you’re going to see higher order volume on those days. To accurately plan for this peak in volume, it’s important to have an appropriate number of staff on hand during those days to process orders quickly.
If you overstaff on days you don’t need it, you’ll pay for people to be standing around doing nothing. If you understaff on days you do need it, you’ll have a backlog of orders that aren’t getting processed on time, and customers may receive their products late.
Some brands like to rely on safety stock, which is an inventory management formula retailers use to determine emergency stock or buffer stock they need to have in case of unforeseen circumstances that can put them on the verge of selling out. It’s a good tactic to use for holiday forecasting, but it comes with downsides like extra storage costs.
4. Reduce Inventory Issues
It’s obvious that with accurate forecasting you’ll have less inventory wasted. You won’t be stuck with an excess of products with that special holiday print or seasonal flavor at the end of the year. Reducing waste is a big inventory issue that is solved with
Stockouts shouldn’t be an issue you face either. With an accurate forecast model you’ll reduce the possibility of customers coming to order from you and seeing “out of stock” when they intend to purchase.
You’ll also see cost savings from having accurate inventory. Without extra stock taking up space, you’ll save on storage fees.
Bottom Line
The holiday season is a crucial time for ecommerce brands to capitalize on consumer demand. Having an accurate forecast is the first step to a successful holiday sales strategy. Be sure your forecast is shared across all departments and teams as well, the last thing you want is for operations and sales to be running in opposite directions.
If you are looking for a 3PL who can help make sure your holiday season is your best yet, reach out to DCL Logistics for a quote, we’d love to hear from you.
Tags: Calculators & Formulas
