Everything Your Need To Know: Forecasting vs Demand Planning
In ecommerce, it’s easy to confuse the terms forecasting and demand planning. Many store owners use them interchangeably—but they are not the same thing.
Forecasting is about predicting what your customers will buy.
Demand planning is about using that prediction to make smarter inventory and supply chain decisions.
Both are critical for ecommerce success. Without accurate forecasts, your plans are built on shaky ground. Without planning, your forecasts never turn into action.
This guide explains the difference between forecasting and demand planning, why both matter, and how you can apply them in your Shopify or ecommerce business.
This post is part of our Inventory Management Fundamentals series, designed to help you optimise your inventory management practices.
What is Forecasting?
Forecasting is the process of predicting future demand based on historical sales data, trends, and market insights.
Purpose: Estimate how many units of a product customers are likely to buy in the future.
Methods:
Quantitative forecasting → uses historical data, seasonality, and sales velocity.
Qualitative forecasting → uses expert judgment, market research, or gut feel.
Example:
If your Shopify store sold 500 units of a product last December and 600 units this December, you may forecast 700 units for next December, adjusting for growth and seasonality.
Forecasting provides the number—but by itself, it doesn’t tell you what to order or when.
What is Demand Planning?
Demand planning takes the forecast and turns it into an actionable inventory strategy. It’s about ensuring you have the right products available, in the right quantities, at the right time.
Purpose: Align supply with demand.
Includes:
Setting reorder points and safety stock.
Coordinating with suppliers and logistics partners.
Adjusting purchase orders based on forecasts, promotions, or lead times.
Example:
If your forecast says you’ll sell 700 units next December, demand planning determines:
How many units to order (e.g., 800 to cover safety stock).
When to place orders (e.g., three months ahead due to long supplier lead times).
How to spread shipments to avoid warehouse congestion.
Key Differences: Forecasting vs Demand Planning
Although they’re closely related, forecasting and demand planning serve different purposes:
Aspect | Forecasting | Demand Planning |
|---|---|---|
Definition | Predicting customer demand | Using forecasts to plan inventory & operations |
Focus | Data, trends, and prediction | Strategy, execution, and supply alignment |
Timeframe | Short to medium term | Medium to long term |
Output | Demand estimate (e.g., 700 units) | Purchase orders, replenishment cycles, stock allocation |
Tools | Statistical models, AI forecasting | ERP, IMS, supplier collaboration tools |
👉 In short: Forecasting predicts the future. Demand planning prepares for it.
Why Both Are Important
Some ecommerce businesses focus only on forecasting. Others think planning alone is enough. In reality, you need both:
Forecasting without planning: You may predict 1,000 sales, but without a plan, you’ll either over-order or under-order.
Planning without forecasting: You’re guessing how much to order, often leading to excess stock or stockouts.
Together, forecasting and demand planning:
Reduce stockouts and missed sales.
Prevent overstock and excess carrying costs.
Improve supplier relationships with more predictable orders.
Protect cash flow and margins.
Ecommerce Example: How It Works in Practice
Let’s say you run a Shopify store selling seasonal apparel.
Forecast: Based on last year’s data and a 20% growth trend, you predict 1,000 hoodie sales in December.
Demand Planning:
Add 200 units of safety stock (to account for demand spikes).
Place an order with your supplier in September to cover lead times.
Split shipments across November and early December to avoid storage overload.
Coordinate with your 3PL to manage higher fulfillment volumes.
The forecast provides the estimate, but planning ensures you actually meet demand.
The Role of Technology
Modern technology makes both forecasting and demand planning easier:
Forecasting tools use AI to analyze sales history, seasonality, and market signals.
Demand planning systems combine forecasts with supplier lead times, logistics, and replenishment models.
👉 This is where Verve AI fits in. It helps Shopify merchants:
Forecast future sales accurately.
Automate replenishment based on reorder points.
Reduce human error from spreadsheets.
Turn data into actionable inventory decisions.
Best Practices for Forecasting and Demand Planning
To make the most of both processes:
Update forecasts regularly (rolling forecasts, not one-off predictions).
Integrate forecasting directly into your planning cycle.
Use scenario planning (what if demand is 20% higher/lower?).
Involve suppliers in your planning process.
Automate reporting and replenishment wherever possible.
Conclusion
Forecasting and demand planning are two sides of the same coin:
Forecasting predicts demand.
Demand planning turns predictions into action.
Ecommerce businesses that master both reduce stockouts, avoid tying up cash in unsold goods, and scale more effectively.
📌 Next Steps:
Explore our guide to Replenishment of Stock.
Learn how to build better Inventory Reports.
See how Verve AI helps merchants forecast and plan inventory with confidence.