What is the primary purpose of forecasting in inventory management?

The primary purpose of forecasting in inventory management is to predict future demand for products. Accurate forecasting allows businesses to plan their inventory levels effectively, ensuring that they have the right amount of stock on hand to meet customer demand without overstocking or understocking. This balance is crucial for maintaining operational efficiency, minimizing carrying costs, and satisfying customer needs.

By understanding future demand trends through forecasting, organizations can make informed decisions about purchasing, production scheduling, and resource allocation, leading to optimized inventory management and reduced risk of stockouts or excess inventory. This proactive approach helps maintain a smooth flow in the supply chain, ultimately contributing to improved customer satisfaction and reduced operational costs.