The Need For Inventory Planning
In business, inventory planning is essential to your success. It is a part of your supply chain that you cannot ignore and one that, if not carefully managed, can lead to losses that severely impact your business’s income and overall viability. As something that greatly impacts your bottom line, you want to ensure your inventory planning is being done correctly. Here is an overview of what goes into good inventory planning and various data points that are taken into consideration.
The Right Tools, Systems, and Methods
To successfully manage your business’s inventory, you have to have the right tools and systems in place. These include:
- Policies and Procedures: a good inventory planning strategy is clearly defined. You should have rules and procedures in place for inventory management. These can include the right steps to take, contact points, and proper management of inventory as it arrives. This makes engaging with your supply chain, storing inventory, and transporting it to store locations more efficient and predictable. Without such systems in place, things can become confused, items can become lost, and employees don’t know what to do or who to contact when there is an emergency.
- The Right People: inventory management is a specialized skill and one that needs a specific job title. You should have an inventory planner (or planners) on staff to focus specifically on your inventory needs and activity. Inventory planners review data, engage with your suppliers, and forecasts future need ensuring you always have enough stock on hand to meet customer demand even as it changes.
- Proper Use of Technology: modern business supply chains are large, complex, and global and to successfully manage your inventory for its present and future needs requires you have the right software in place. Having a good software platform provides past information for research purposes, allows you to track current stock, can assist in orders, and prevent common errors such as over or under-stocking.
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Advantages of Inventory Planning
The effort required to establish an effective inventory planning system is well worth it due to the many advantages you gain.
- You can prevent overstocking, which wastes money, storage space, and can result in inventory loss as overstocked items often sit in storage and may need to be disposed of.
- You also prevent under-stocking. Running out of inventory is also a situation you want to avoid as it causes you to lose sales, reduces profit, and can damage your company’s reputation as customers tend to take their business elsewhere when they encounter inventory shortages.
- Inventory optimization is another advantage. By tracking inventory needs and sale figures, you can quickly locate items that are not selling and are not popular with customers. This allows you to remove these items from your regular inventory and place any remaining stock on sale for clearance.
- Effective inventory management keeps inventory moving. As you restock items that are sold, you can minimize your storage and warehousing needs. Keeping too much inventory on hand can increase costs and reduce profits. The more efficient you can make your inventory system, the more money you can make.
- Finally, having a good inventory planning system in place reduces common warehouse errors and expenses. These include having old stock, redundancies in inventory, stock becoming lost due to a lack of effective tracking, and inventory theft.
Running a successful business requires careful tracking and forecasting of relevant data points. By establishing a well-managed and well-maintained inventory system, you can successfully track your current stock, track sales, effectively restock and plan for the future, so you can avoid issues such as inventory shortages or keeping stock on hand that is not popular with your customers.
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