A system and method for grouping units for forecasting purposes is presented. A plurality of stock keeping units (SKUs) is presented to an embodiment. Initial medoids are chosen based on a vertex within a set of vertices, each of which represent a SKU. Then, each vertex within the set of vertices is associated with its closest medoid to form initial clusters. There can be a cap on the number of vertices in each cluster. Thereafter, an iterative algorithm is performed wherein a probability is assigned to each vertex. One or more vertices are randomly chosen, with the weights of the vertices weighting the random choice. The chosen one or more vertices are moved to another cluster. The algorithm is performed until no further improvements result from moving one or more vertices to another cluster. Other embodiments are also disclosed herein.