Your Clear Line of Sight Into Future Inventory and Working Capital
A simple, proven inventory forecasting model that helps you project future inventory balances, cash flow, and inventory turns—without guessing.
Built for supply chain, finance, and planning teams who want clarity, not guesswork.
A Better Way to Plan Inventory, Working Capital, and Turns
This Input-Output Model gives your team a single source of truth for forecasting Direct Materials, Labor, Cost of Goods Sold (COGS), Reserve changes, and inventory reduction projects—so you can see where inventory is going long before the year ends.
This free tool includes:
- Quarterly & Annual Operating Plan (AOP) Input-Output Models
- Month-over-month & year-over-year comparisons
- Automatic 13-point turns calculation
- Editable inputs for every major inventory driver
- Step-by-step instructions inside the file
Download the Model
Forecast inventory with confidence.
See future COGS, Net Inventory, Accounts Payables, and 13-point turns—all inside one clear Excel model.
A Smarter Way to Understand Inventory Forecasting
Inventory forecasting doesn’t have to be a guessing game.
With the Input-Output Model, you can map every inflow, outflow, and financial adjustment that drives the balance sheet’s inventory value—and tie it all back to cash flow and working capital.
What You’ll Learn
Why Inventory Forecasting Breaks Down
When forecasting is scattered across functions, the business ends up flying blind.
Most teams know inventory affects cash flow, service levels, production efficiency, and financial results. But they rarely have a model that ties all of it together.
What usually happens?
- Direct Materials are tracked by supply chain.
- Labor is guessed or ignored.
- COGS projections live with finance.
- Reserves are an afterthought.
- Inventory turns become a trailing indicator—not a steering tool.
The result: leaders are caught off guard at quarter-end, working capital becomes volatile, and teams fall into reaction mode instead of driving strategic decisions.
Forecasting isn’t broken because teams lack skill.
It’s broken because they lack a unified model.
The Input-Output Model Framework Explained
A simple structure that shows where inventory is going—and why.
The Input-Output Model brings clarity to the chaos by mapping every major driver of inventory:
Inputs:
- Direct Materials (External PO’s, Internal Orders, In-Transit)
- Direct Labor (if capitalized)
Outputs:
- Cost of Goods Sold
Financial Adjustments:
- Reserves (provisions)
- Foreign Exchange Changes
- Standard vs Actual Cost Variances
- First In, First Out & Intercompany Profit Adjustments
Strategic Changes:
- Inventory Reduction Projects
Each period you start with Beginning Gross Inventory → apply all inflows → subtract all outflows → adjust for financial changes → subtract reserves → arrive at Ending Net Inventory.
Net Inventory then feeds into 13-point Inventory Turns, the gold standard for measuring working capital efficiency.
How to Build a Quarterly Forecast That Holds Up
A rolling forecast keeps you ahead of changes—not reacting to them.
A near-term forecast that maps inventory over the next 3 months and pinpoints weekly movements in your plan.
The Quarterly Input-Output Model helps you:
- Capture current-period forecasts for all inputs and outputs
- Compare this week’s outlook to last week’s
- Spot changes early (demand changes, supply slips, cost shifts)
- Visualize the forecast using a waterfall chart
- Understand how every adjustment affects ending Net Inventory
Teams use it to avoid last-minute surprises, align procurement and production, and manage short-term cash flow expectations tightly.
How to Build an Budget/AOP Forecast You Can Defend
Forecast next year with confidence—not gut feel.
Structure your Budget/Annual Operating Plan around real supply, demand, and cost behavior.
The Budget/AOP Input-Output Model includes:
- Prior year historical data for all major categories
- A full-year forecast for Direct Materials, Labor, and COGS
- Reserve and finance adjustments tied to policies
- Inventory reduction project assumptions
- Automatic calculation of next year’s 13-pt turns
With these inputs, the model helps teams:
- Align supply and production to revenue targets
- Forecast accounts payable from material inputs
- Project inventory turns and Days of Inventory
- Improve working capital planning
This turns the Budget/AOP from a negotiation exercise into a data-backed financial plan.
Turning Forecasting Into a Continuous Process
When your model updates as reality changes, accuracy improves.
Great forecasting isn’t a once-per-year or even once-per-quarter exercise.
It’s a loop: forecast → compare → adjust → improve.
That’s where most spreadsheets fall apart.
But it’s exactly where Nvexus shines.
Where Nvexus Amplifies the Input-Output Model
Forecast faster. See earlier. React sooner.
Nvexus brings structure and automation to the most time-consuming parts of the model:
1. Direct Materials Forecasting
Turn your supply plan into a clear, time-phased forecast.
Nvexus brings all material inflows into one place so planners can understand what’s coming, when it’s coming, and how it affects future inventory. The module makes it easy to correct timing issues, validate supplier commitments, and tighten forecast accuracy.
You can:
- See upcoming supply by week, month, quarter, and year
- View PO, Internal Order, Planned Order, and Requisition inflows
- Drill down into items inside each period
- Move items between time buckets to correct forecasts
- Toggle between PO Price and Standard Cost
- Exclude indirect materials from the forecast
- Prioritize Past-Due and No-Promise-Date POs
2. Direct Materials Receipt
Close the gap between what you expected — and what actually arrived.
This module compares forecasted receipts to real receipts in real time, giving visibility into supplier performance, schedule changes, and risks to working capital. It helps teams understand both the variance and the drivers behind it.
You can:
- Compare actual receipts to forecast instantly
- Spot early or late deliveries
- Identify suppliers driving variance
- Track demand changes and reschedules
- Understand the cash flow impact of over/under receipts
- See DM Daily Receipts to optimize receiving operations
3. On-Hand Inventory Segmentation
A clearer picture of what your inventory really is — and what to do about it.
Nvexus uses a proprietary segmentation algorithm that analyzes every SKU’s demand pattern, supply status, and planning parameters. The system then categorizes inventory into actionable groups so teams can quickly understand where they are overstocked, where they are at risk, and where improvement opportunities exist.
With one view, you can see what portion of your inventory is:
- Excess / Zero-Demand: Items with little to no demand signal that may require liquidation, transfer, or disposition.
- Early-to-Need or Late-to-Need: Material arriving too soon or too late, driving working capital waste or service risk.
- Safety Stock: Inventory held for protection — validated against demand variability to ensure it’s not overstated.
- Work in Progress (WIP): Items stuck in production queues or with long cycle times that slow throughput.
The module doesn’t just label inventory — it points you toward specific actions that will optimize fast-moving items and reduce slow-moving ones.
Whether you’re targeting working capital, improving flow, or cleaning up planning parameters, segmentation gives you the insight you need to act decisively.
4. Part-Level Inventory Turns
Understand which parts are driving your performance — and which are dragging it down.
Nvexus automatically calculates SKU-level inventory turns for every item in your database. This helps teams quickly identify:
- High-turn parts that move frequently and generate value
- Low-turn or no-turn parts that tie up cash
- Critical parts where low turns may still be acceptable to protect service levels
The power of SKU-level turns is visibility. Instead of relying on a single site-wide turns metric, teams can drill down and ask:
- Which parts are overstocked based on their usage?
- Where is working capital tied up unnecessarily?
- Which SKUs need parameter updates (lead time, MOQ, safety stock)?
By exposing performance at the part level, the system gives planners and leaders the insight they need to target improvements precisely, not broadly.
5. ABC/XYZ Segmentation
Smarter stocking policies start with smarter classification.
Nvexus classifies every SKU using ABC (value impact) and XYZ (demand variability) segmentation. Together, they show:
- Which items deserve tight control
- Which are unpredictable and need protection
- Which low-value parts can be simplified
This segmentation makes your planning strategy clear, actionable, and aligned to how each part actually behaves.
6. Inventory Burndown + Audit Trail
A clear record of where each part has been — and where it’s heading next.
The Inventory Burndown view shows future projected on-hand balances for every SKU by combining upcoming supply, expected demand, and current inventory. It helps teams anticipate shortages, prevent excess, and understand when action is needed.
The Audit Trail complements this by tracking how demand, supply, and inventory changed over time. Instead of guessing why a plan shifted, you can see:
- When demand was added, removed, or rescheduled
- When supply orders changed dates, quantities, or status
- How each adjustment affected the part’s inventory position
Together, these tools give planners the context behind every movement and a forward look at future risks—making root-cause analysis fast and inventory decisions far more informed.
Looking for deeper insight into how inventory performs across the business?
Explore these related tools:
Inventory Turns Calculator — A plug-and-play Excel model that uses the same 13-point turns method to compare performance across sites and track working capital trends over time.
101 Ways to Optimize Inventory — A cross-functional playbook with 101 actionable tactics to avoid unnecessary inventory and reduce existing stock, including improvement strategies by ABC/XYZ segment.
FAQs
What is the Input-Output Model?
A structured way to forecast inventory by starting with beginning balances, adding known inputs, subtracting outputs, and adjusting for financial changes.
Why use Net Inventory instead of Gross Inventory?
Net Inventory includes reserves adjustments, allowing for accurate financial reporting, showing what inventory is actually worth and can be sold for, not just what it costs.
It prevents overstating assets by adjusting for potential losses from obsolescence, damage, or spoilage, giving investors and managers a realistic view of financial health and better decision-making.
Why are 13-point turns important?
They smooth out month-end noise and show true annual performance by using 12 months of COGS and 13 months of inventory.
Should Labor always be included in the model?
Only if your company capitalizes labor into inventory. If labor is expensed monthly, exclude it.
How does this model help forecast Accounts Payable?
Direct Material Inputs indicate when supplier invoices will hit AP, giving clearer cash flow projections.
Can this model work without an ERP?
Yes, but forecasts are far more accurate when using ERP data for supply, labor, and COGS.
Does Nvexus replace the Excel model?
No—the model teaches the framework.
Nvexus automates inputs, reduces manual work, and improves speed and accuracy.
Why do reserves matter in forecasting?
Reserves determine which inventory is financially usable, and ignoring them will overstate your working capital.
When parts become obsolete or inactive, finance assigns a reserve to reduce their book value—often to zero—because those items are unlikely to generate profit and continue to incur carrying costs. Once a reserve is applied, that inventory is no longer considered part of your financial inventory value, and it may eventually be scrapped. Including reserves in your forecast ensures Net Inventory reflects reality, not just physical stock on the shelf.
Is this only for manufacturers?
No. Any business holding material inventory (distribution, assembly, repair, refurbishment) can use this model.