What tools or methodologies do you use to forecast and manage inventory for hardware products?

Great question. The only certainty in forecasting is that it will be wrong. The question is to what degree? And how can you reduce the variance? Forecast is an estimate.

There are 2 approaches to estimating the demand for your product. I recommend using both, and then to perform checks and balances, using the 2 methods.

Top Down (Entrepreneurial method) - If you are a category-defining business, you are creating new markets. Evaluate what products are customers currently using and how does your product change that equation. Does it require a change in behavior? If so, it will take time to penetrate the market. (Think VR headsets for example).

If you are a smaller company with large ambitions, it can be tempting to forecast higher to satisfy investor interests, but over-forecasting can be devastating to a small business. Scaling up is a problem that can be solved easier than scaling down.

Bottom-up (For established business) - Here you have a lot of history to work with. Start the process early. Work with your Sales and Marketing teams to understand demand signals, by Product SKU, by Geo, by Channel. Understand the potential of promotions, pricing and marketing so that you can manage budgets accordingly.

Finally, as a Product Leader, you are responsible for both the top and bottom line. So develop contextual understanding of sales figures. Ultimately, methodologies and tools will only help so much. You deep understanding of the market, demand drivers, extraneous factors affecting demand will ultimately help reduce the forecast variance.