What Is Inventory Planning and How To Implement It?

Behind every successful ecommerce business, there is a lot of strategic inventory planning involved. At the heart of this planning lies inventory management – the process of strategically managing inventory in order to meet customer demand while minimising costs.

For medium to large eCommerce brands and wholesalers, inventory planning comes with additional complexity.

  • You may be operating across multiple online sales channels as well as physical stores in various locations.

  • You may have a large database of customers or be looking to scale up operations in the near future.

  • Sudden market shifts can add an extra layer of complexity to your inventory planning. 

Whatever your growing business looks like right now, pinning down a successful inventory plan and management strategy is essential for your future security and success. 

This article will give you a quick guide on what it is and how to implement it. 

What is inventory planning


In order to succeed in eCommerce, it is essential that businesses understand the importance of inventory planning. By effectively managing inventory levels, online stores can reduce their logistics costs, save time and resources, and ensure that they are able to give customers what they want, when they want it.

Inventory planning is the process of optimising inventory levels to meet demand and optimise internal costs.

Inventory planning is a critical component of supply chain management since it supports the seamless operation of your supply chain. It entails a number of procedures and tasks, such as inventory forecasting, storage optimization, inventory tracking, and more.

Inventory process flow


The steps of inventory process flow or the lifecycle of inventory apply to retail, manufacturing, maintenance and service organisations alike.

Purchase

Companies buy inventory based on inventory planning research or, if the department or company is new, on their best estimate of what is needed.
Although excess inventory is generally undesirable, organisations may overstock when making their first purchases.

Store

Companies must store or warehouse inventory in a clean, secure area, for which they will incur holding costs to cover lighting and heating or refrigeration.
Companies should devote time to researching and planning for convenient stock checking and retrieval from storage.

Use

Companies take stock items from inventory for their intended purpose as sales items, raw materials or repair parts.

Track

Tracking inventory helps businesses keep tabs on what they have on hand and what needs to be reordered. It can also help businesses spot trends, such as increases or decreases in demand for certain products.

Reorder

When inventory levels dip below a certain threshold, businesses reorder more goods from their suppliers. They can reorder or replenish inventory automatically or manually.

Forecast

In order to plan future inventory needs, businesses forecast future demand for their products and services. This involves analysing past sales data and making assumptions about future trends.

By forecasting demand, businesses can avoid stock outs and excess inventory.

Challenges of inventory planning 


Scaling your inventory planning solution can be one of the biggest challenges of growing your company.

In order to establish reliable inventory planning, businesses and organisations must do three things. These are:

Demand

forecast

Using historical sales data, KPIs and variables like seasonality, promotions and market predictions to make data-driven forecasts. 


Control

costs

Considering things like choosing the right suppliers, automating purchase order process, reducing cash tied up in slow-moving products etc. 

Store

efficiently

 Storing the right amount of products in the right place to optimise your order fulfilment routes if you have multiple inventory locations


When these three workflows exist in tandem, inventory flows continuously, seamlessly, and efficiently. But, of course, maintaining such a complex operation comes with some challenges.

Inventory planning entails bringing together a wide range of inputs and variables.

Even for companies with a single sales channel, effectively planning inventory can be difficult.

Things become much more complicated when a company relies on multiple channels, various warehouses, and perhaps multiple 3PL suppliers. Especially when demand fluctuation and seasonality are factored in.

Here are some of the challenges that many eCommerce companies face when it comes to inventory planning:

Unreliable data

Real-time data is required for a seamless and lean supply chain operation. However, data is frequently not tracked systematically, especially if it is tracked manually.

Even when it is monitored, it is spread across several distinct systems. This makes it difficult for merchants to pull together all of the data to get an accurate view of their inventory.

In the lack of a unified perspective of previous and/or current inventory levels, as well as any other critical sales data, you will be left in the dark when it comes to making inventory-led choices. This is why putting in place a centralised, real-time inventory management system is a must.

Implementing a way to track inventory in real time ensures you have accurate data, even as you expand into new sales channels and grow your distribution network.

There are many inventory software solutions to choose from that make it easy for eCommerce companies to better track inventory.

Lack of automation

Customers have high expectations for the speed with which orders are completed and delivered. However, getting bogged down in inventory planning and management can have a negative influence on supply chain efficiency.

Inventory automation is commonly used by eCommerce merchants to automate inventory-related processes that are frequently time-consuming and prone to human error, such as inventory losses, when inventory is maintained manually.

It's no surprise that more and more modern merchants are turning to automated technologies to help with inventory management.

Automation can help to save time-consuming human labour while also enhancing inventory accuracy.

Lack of internal training

Your warehouse processes will most likely fail or slow down if your employees are not properly trained.

To truly add value to inventory planning, you must provide your staff with knowledge of the most recent supply chain procedures, data and analytics, distribution metrics, and technology.

However, investing in training and installing technology may be costly as well as time-consuming.

Though many eCommerce companies have team members who oversee logistics planning, it's not unusual for online brands at all phases of development to work with a 3PL that provides the technology, data, and knowledge required to properly plan and manage inventory.

Why inventory planning is essential for eCommerce


When you first start your business, it might be easy to manage inventory levels without putting much time or thought into inventory planning. But as your business grows, the more inventory you will have to order, manage, replenish, store, and prepare to sell.

Since inventory levels change constantly throughout the supply chain due to fluctuations in demand, it can be a challenge to maintain an optimal amount of inventory that meets current demand. 

To effectively plan inventory inventory levels and keep up with changes in demand, businesses must invest resources into building sophisticated inventory planning models and leveraging inventory management software solutions.

Only by incorporating these strategies can businesses successfully control inventory costs while ensuring steady supply of goods for customers. 

In the end, managing inventory effectively requires careful investment of time and resources. With the right tools and strategies in place, businesses can achieve success in balancing inventory across their supply chains to accommodate demand fluctuations and growing customer expectations.

Inventory planning tips to maximise your success


While the specific inventory planning activities you must take may vary depending on the approach you choose, there are a number of general best practices you can put in place to maintain your inventory levels in good shape.

Conduct regular inventory counts


Inventory planning is heavily reliant on accurate data. You should try to keep disparities to a minimum, and one of the best methods to do so is to physically count your inventory on a regular basis. This guarantees that the inventory levels displayed in your system correspond to what is really in the shop.

Automate repeatable inventory tasks


Make your inventory planning processes easy for yourself and your team by automating stages.

For example, rather than manually searching up statistics such as goods sold or a product's sell-through rate, investigate whether your inventory management system can do the maths for you.

Keep your team accountable


Inventory planning involves several moving parts, such as ordering stock, receiving goods, selling products, and creating reports.

Promoting responsibility among your teams is an excellent method to guarantee that assignments are done on time.

Check in on a frequent basis to ensure performance and that the right employees have access to the data and reports required to make inventory decisions. 

Benefits of inventory planning


There are numerous benefits to inventory planning, but at the end of the day, it's all about stock management and making the right inventory decisions to meet demand while being profitable. The following are the main benefits of inventory planning.

Provides better cash flow

Total inventory expenses, which include money spent on holding and storing inventory, are a significant expense for retail companies. It can equal to around 20% to 30% of your entire inventory costs.(Source).

Inventory planning allows you to make better use of inventory finance. For example, when you order just enough product to fulfil future demand, you prevent overstocking and don't lock up too much cash in inventory.

Inventory planning also guarantees that inventory accounting runs smoothly throughout tax season, and it makes generating accurate inventory reports a lot easier. Finally, inventory planning allows you to make better decisions, which allows you to develop your business faster.

Improves inventory forecasting

Inventory forecasting helps make better-informed supply decisions that estimate the total sales and revenue for a future period of time.

It not only helps you meet customer demand, but it also helps you make better financial decisions that impact profit margins, cash flow, inventory allocation, warehousing, staffing, and overall logistics spend.

Better storage system

Inventory storage demands not just careful planning but also continuous development.

If you have specific goals for your inventory, you will be able to pick the ideal inventory storage solution for your team based on how much space you have, the size of your products, the number of SKUs you have, the total units you carry, and other factors.

You may also arrange the layout and design of the warehouse area, making it much more efficient.

Taking the effort to organise your warehouse, also known as warehouse slotting, will help you maximise your space and speed up fulfilment without sacrificing order accuracy.

If you believe your warehouse is at capacity, slotting can assist you in identifying practices to improve storage capacity.

Improving Inventory Planning With Technology


ERP software solutions enhance visibility, control and analysis across all installations, from factories to warehouses, including dynamic facilities.

Notable are the materials management (MM) modules that coordinate orders with procurement and other modules.

Although ERP systems include location management for inventory, they usually do not include warehouse management systems (WMS) out of the box, which focus less on stock and more on warehouse operations.

In the past, inventory planning was a manual process, often involving hours of data entry and information analysis. However, today there are a number of software solutions available that can automate and streamline the inventory planning process. 

On-premise implementations may offer added security and the confidence that comes from owning the software. However, cloud-based offerings now provide inventory management options for diverse situations.

CommerceCore™ inventory management system key features


The main goal of the CommerceCore™ inventory management system is to minimise overhead by providing key information and alerts as to when it’s time to replenish, restock, or reproduce products.

The CommerceCore™ inventory planning and management system reduces overhead and increases operational productivity and efficiency by addressing several common problems related to a company’s inventory.

Data entry and processing improvement methods


The primary purpose of ERP inventory control and inventory management systems is to reduce overhead by delivering critical information and notifications when it is time to replenish, restock, or recreate items.

By handling various inventory challenges, the CommerceCore™ inventory management system reduces overhead and boosts operational productivity and efficiency.

Real-time company wide reporting


Your company is just as good as its data.

The CommerceCore™ inventory management solution enables your company to receive real-time access to work orders, purchase orders, inventory information, and sales — seamlessly combining information between the CommerceCore™ solution and your warehouses.

Seamless integration


The desired effect of using the CommerceCore™ Merchant Operating System is to gain improved operational efficiency that leads to more productivity, sales, and revenue.
The CommerceCore™ system integration is crucial to reaching this goal.

For example, business process improvements should include data interaction between the CommerceCore™ Merchant Operating System and your warehouses to ensure correct and timely invoicing data, as well as payment of purchase orders and inventory control and management, all without the involvement of manual processing.

Conclusion:


Inventory planning can be a difficult and time-consuming process, but the CommerceCore™ inventory module can help you streamline the inventory management process and make it more efficient.

With features such as the ability to track inventory across multiple locations, automatically manage reorder points, and forecast demand, you can plan production and distribution without having to worry about running out of stock or having too much inventory on hand.

As a result, you'll be able to save time and money while still ensuring that your customers' needs are met.

Contact us or schedule a demo with our team so we can discuss how best to integrate these powerful features into your operations seamlessly. We look forward to hearing from you soon!


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Merchant Operating System (MOPS) refers to a type of software used by Shopify merchants to handle day-to-day online-business operations including warehouse management, multichannel product management, invoicing, payment tracking, order processing, and much more.

The Merchant Operating System also includes corporate performance management software to help with planning, budgeting, forecasting, and reporting.

The MOPS is built on the widely popular open-source ERP Odoo Enterprise Framework. 26000 apps/plugins/modules/extensions are available from an Integrated App Store.  We help our customers carefully pick and integrate apps based on their needs through our Professional Services.

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What Is Inventory Planning and How To Implement It?
Irena Milovanovic 29 April, 2022
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