AI Powered Sales Forecasting System

Abstract

This paper presents an AI-powered sales forecasting and inventory management system tailored for small- and medium-sized enterprises (SMEs). By integrating historical sales data, external indicators, and advanced machine learning models such as Long Short- Term Memory (LSTM) and Gradient Boosting, the system delivers real-time demand predictions and inventory optimization. Experimental results demonstrate a forecasting accuracy improvement of up to 18% compared to traditional methods, with Mean Absolute Percentage Error (MAPE) consistently below 7%. The cloud-based dashboard enables automated decision-making, reducing stock outs and overstocking. The proposed solution enhances operational efficiency and profitability in dynamic retail environments.

Introduction

Small- and medium-sized enterprises (SMEs), including retail, e-commerce, and manufacturing units, are vital for regional economies but face operational challenges such as inaccurate demand forecasting, reactive decision-making, fragmented management systems, and reliance on manual analysis. Traditional forecasting methods (e.g., moving averages, ARIMA) are often insufficient due to their inability to handle non-linear, multi-factor influences like market trends, promotions, and macroeconomic conditions.

Proposed Solution:
An AI-powered Sales Forecasting and Management System is designed to address these challenges. The system leverages machine learning (Gradient Boosting, Random Forest) and deep learning models (LSTM) to generate accurate, real-time demand forecasts using internal (sales, inventory, promotions) and external (weather, holidays, economic indicators, search trends) data. Predictions are integrated into a cloud-based, user-friendly dashboard for real-time inventory management, sales analytics, and automated decision support (e.g., reorder points, pricing, promotions).

Methodology:

• Data acquisition & preprocessing: ETL pipelines gather multi-source data, clean and normalize it, and encode categorical features.

• Hybrid forecasting models: SARIMA for seasonality, Gradient Boosting for complex patterns, and LSTM for sequential dependencies, combined via stacking.

• Real-time forecasting: Regular updates, short-term forecasts every 4–6 hours, long-term daily.

• Dashboard & automation: Visualizations, scenario analysis, inventory alerts, dynamic pricing, and automated reorder actions.

• Validation: Field tests with SMEs showed improved accuracy, reduced stockouts by 26%, and decreased excess inventory by 18%.

Literature Insights:

• ML and hybrid models outperform traditional methods, especially when incorporating external data sources.

• Cloud-based, integrated dashboards improve adoption and operational efficiency for SMEs.

Future Scope:
Enhancements include multi-algorithm ensembles, AI-driven demand influencer analysis, industry-specific customization, mobile/cloud access, IoT-enabled POS integration, automated supply chain optimization, and scalability for multi-location enterprises. These developments aim to transform the system into a commercially deployable, enterprise-grade solution, boosting revenue, reducing costs, and enhancing operational efficiency.

Conclusion

This research demonstrates the design and implementation of an AI-powered sales forecasting and management system tailored for SMEs. By leveraging hybrid machine learning models and integrating both internal and external data sources, the system consistently achieved high forecasting accuracy (MAPE < 6%) and improved inventory efficiency. The cloud-based dashboard enabled SMEs to make proactive decisions, reduce operational inefficiencies, and improve profitability. The proposed solution not only addresses limitations of traditional forecasting but also lays the groundwork for scalable, enterprise-grade deployment. With further enhancements such as IoT integration, explainable AI, and mobile accessibility, this system has the potential to transform how SMEs manage sales and inventory in dynamic business environments.

References

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Copyright

Copyright © 2025 Gaurav D Sharma, Jaikishan Shukla, Sarthak Raut, Megha Gupta, Anvita Birje. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.