Returns forecasting vs demand forecasting: what's the difference?

Demand forecasting predicts outbound volume: how much of a product customers will buy in a given period. Returns forecasting predicts inbound volume: how much of what was already sold will come back. They are related but distinct calculations, and treating them as one blended number is where most returns processes go wrong. A demand forecast that's too high inflates purchasing directly; a returns forecast that's wrong inflates purchasing indirectly, by causing a warehouse to under-credit the supply that's already circulating back to it. The two forecasts should be calculated separately, from separate historical signals (sales history for demand, sales-to-return matched history for returns), and then reconciled together at the replenishment stage, where the net requirement from a supplier accounts for both what's expected to sell and what's expected to come back.