It is no secret that an accurate forecast of the future demand of a product is crucial in achieving the four "rights" of effective inventory management: that is, getting the right quantity of the right item to the right location at the right time. As we’ve discussed in previous articles, products with different patterns of usage require different forecasting methods. The forecast for items with recurring usage is usually based on four elements:

• Some sort of average of past usage.
• A trend derived from past usage.
• Future anticipated usage that is not revealed in past usage or trends.
• A forecast horizon reflecting when material ordered today can be received and the length of time for which inventory must be purchased.