Last updated: December 2, 2022
Did you know? Around 43% of small businesses in the United States fail to track inventory or monitor using a manual system. Keeping tabs on your stock levels is vital for inventory management and order fulfillment. Do it incorrectly, and you risk facing stockouts, which hold up your order fulfillment process.
In the retail sphere, stockpiling merchandise and simply “seeing what sticks” or, even worse, hoping for the best is by no means an efficient strategy. If you want to generate sales and move products, you have to be organized and plan everything you buy in your store ahead of time.
The team here at Upscribe believes product subscriptions pave the way to inventory planning success. So stick with us and we’ll show you through the ins-and-outs of inventory planning.
Inventory planning involves analyzing and predicting how much of your specific product needs ordering to implement forthcoming sales effectively. While the idea may appear straightforward, inventory planning and control are vital – they help evade possible problems with transactions and fulfillment, ensuring your customers remain happy.
To carry out inventory management successfully, you must have a comprehensive understanding of which of your products must be purchased and how many are needed to sustain enough stock.
It’s imperative to estimate demand for your products in line with past trends otherwise you may waste your precious pennies on overstock. You’ll also be able to forecast how much inventory you need to prevent lost sales, unhappy customers, and stockouts.
In a nutshell, demand forecasting is an estimation. For example, to predict how much a company will sell in the approaching weeks or months, they may explore seasonal demand, past trends, impending marketing campaigns, market research, and customer expectations.
Instead, demand planning is a whole lot more reactive. While demand forecasting determines what will probably happen, demand planning makes it happen. In other words, it takes that prediction and ensures every section of the supply chain functions in the right way, with the least expenditure and most productivity.
If you’re a business owner, you’ll want to watch your inventory very closely, as it normally symbolizes the second largest cost to your company. For inventory planning and control, you’ll need to devise forecasts to ascertain the amount of inventory available for your consumers.
Inventory control is when you do some number crunching on all your company’s inventory items and maintain them. There are several advantages to this, including:
If you don’t manage your stock levels correctly, this can result in revenue losses. To prevent issues like overstocks and stockouts, it’s your job to forecast and correct how much inventory you need. To reduce your costs, you can cut supplier lead time by enhancing inventory management in your supply chain. Adding subscriptions to your store through Upscribe will empower you to develop and prosper in today’s rapidly evolving ecommerce landscape.
If you manage your inventory planning meticulously, you make better, speedier decisions.
Monitoring inventory becomes clear-cut, as you’re able to identify how many of your products are in the warehouses. Plus you can check how many orders arrived, what was distributed, what was returned, as well as define the potential stockouts.
Arguably, if you manage your inventory control efficiently, this means improved storage management, and, therefore, you’ll easily be able to find where these products are situated, stored, and boxed. It also leads to your buyers receiving your products on-time, or even before their delivery date.
If you have the correct number of inventory to hand, fulfilling orders will be a seamless, fast, and smooth experience. In turn, this develops customers’ trust in your products and helps
you transform a one-off buyer into a repeat customer. If you manage your inventory planning accurately, the more aligned you’ll be with your buyer’s expectations about the accessibility of your products.
This is a common occurrence in most businesses. You won’t sell all your materials and products – and chances are you’ll have a good deal of obsolete material on your hands. This is the stock that you don’t plan on selling. Over time, inventory managers will discard these obsolete materials.
But, if there’s ever a need for these end-of-lifecycle products again, many inventory managers don’t use obsolete products, instead choosing new materials instead. Not only does this cause a rise in waste material, but it also leads to an increase in costs.
Answer: Invest in a stock control application. This type of control system detects products that have reached the end of their life-cycles and ensures they’re used sensibly and appropriately. Thus, using this application will enable inventory managers to manage stock levels correctly.
Consider the complications of detecting or finding stocks in your inventory – there’s no way you’ll be able to distribute your products punctually. Customers won’t look kindly on this and it can lead to poor customer retention. Inadequate visibility of your inventory can affect your business, no questions asked.
Answer: Invest in a real-time inventory planning system. Implementing Lot Tracking can assist your warehouse employees to:
Purchasing new products and failing to sell the existing ones can drastically affect your business revenue. If you don’t control your stock well, you’ll experience problems. If you decide to carry this out manually, there’s a chance that some products are missed. This could lead you to buy more items than is needed.
Take the headache out of inventory planning by automating steps in your inventory planning process. So, rather than physically searching for information such as a product’s sell-through rate or products sold, let your inventory management system calculate things on your behalf.
The real secret to successful inventory planning is accurate data. So, reduce inconsistencies as much as you can by actually counting your inventory regularly. In doing so, you make sure your inventory levels in your system tally with what’s physically in the store.
Keep track of all product information for materials on your inventory such as barcode data, lot numbers, SKU codes, suppliers, and countries of origin. Think about monitoring how much each item costs over a specific amount of time so you fully understand factors that may
Let’s look at the eight inventory management steps that any inventory plan worth its salt is founded on:
It’s easy to implement product planning by developing your subscription offerings, as they allow you to bundle together complementary products. You can also analyze your sales figures for individual products versus subscriptions.
Upscribe, helps you assess your customers’ purchasing behaviors, so you don’t have to figure out which products constantly need replenishing due to repeat purchases. You can also bundle products that are performing well with those that always have excess stock.
Source: Upscribe
While there isn’t any definitive way to plan your inventory, there are a few methods to pick from. But all come with their pros and cons. We’ve pulled together some of the best inventory planning methods adopted by leading online companies:
In other words, this means first in, first out. This management method involves selling or disposing of products that were acquired first. For example, if you’re retailing perishable items, FIFO is perfect, as you’re able to record the date that each item was obtained and
sold. Just be sure to keep track of expiration dates.
To do this successfully, organize your storage room or stock so that it’s effortless to implement FIFO. For instance, grocery stores organize their freezer products so that the oldest purchases are displayed right at the front.
The economic order quantity (EOQ) model is great if you’re passionate about running a lean
warehouse. You have to work out the ideal order quantity to reduce logistics expenses and optimize storage space.
It isn’t difficult to figure this out – all you need are these three variables:
Then you can use the below sum:
EOQ = square root of: [2(setup costs)(demand rate)] / holding costs
Let’s say you were selling a popular children’s toy to shops and that you had a setup cost of $750, with a holding cost of $100 every year. Now let’s say you had a yearly demand of 10,000 units. Your EOQ would be worked out as follows.
Square root of: (2 x 10,000 x 750) / 100 = 38.7
That means that a minimum order should be for at least 39 toys (rounding up), in order to minimize your costs.
Make smart inventory planning choices, and you’ll no doubt be on the road to success. The only drawback is that it entails handling numerous moving pieces while paying close attention to the data and previous inventory trends.
Want to spend less time on inventory planning and more time growing your ecommerce business? Upscribe is your one-stop inventory planning platform. We empower you to attract, expand and preserve your subscribers to make better business decisions so you can scale your business. How about scheduling a demo?
