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
Challenges of inventory planning
Using historical sales data, KPIs and variables like seasonality, promotions and market predictions to make data-driven forecasts.
Considering things like choosing the right suppliers, automating purchase order process, reducing cash tied up in slow-moving products etc.
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:
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
Conduct regular inventory counts
Automate repeatable inventory tasks
Keep your team accountable
Benefits of inventory planning
Provides better cash flow
Improves inventory forecasting
Better storage system
Improving Inventory Planning With Technology
CommerceCore™ inventory management system key features
Data entry and processing improvement methods
Real-time company wide reporting
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.