Retail eCommerce businesses often find it challenging to meet the demand effectively as demand constantly changes due to changing consumer trends. Inventory planning for stocking appropriate stock levels can be complex as retail stores and businesses now maintain numerous outlets, warehouses, and distribution centers. A detailed inventory plan is necessary to satisfy consumer demand at the right time and eliminate situations of overstocking and out-of-stock scenarios.
Inventories are maintained by almost every business, whether in the form of raw materials or finished goods. Retailers store processed items for selling to customers. Inventory is one of the essential aspects of every company and organization requiring inventory to operate independently and reduce delayed deliveries. Properly stocked inventories enable companies to schedule manufacturing and satisfy consumer demand on time. Businesses can get bulk orders at a discounted price with efficient inventory replenishment.
With proper inventory replenishment, businesses can reduce the cost of stocking extra products, increase sales and profits and enhance brand loyalty through customer satisfaction. Let us explore in detail what inventory planning is and what challenges businesses face.
What is Inventory Replenishment?
Inventory replenishment is the process of shifting goods from inventory storage to the picking shelves or obtaining inventory from a supplier to stock it in a fulfillment center or warehouse. It is an inevitable component that businesses cannot do away with, enabling them to function constantly. But excess inventory locks up resources in dead stock and prevents business growth, and additional money is spent on storage, refrigerating, and heating the excess stock. It helps companies in warehouse operations, order management, supply chain management, and customer satisfaction. Demand forecasting is essential for inventory replenishment as it gives you an idea of how much stock should be reordered and when to order replenishment.
Effective inventory replenishment can assist companies in obtaining goods beforehand at discounted rates so that last-minute purchases can be prevented. Overstocking can compel companies to sell products at discounted rates.
Challenges in Inventory Planning
Inventory planning includes different factors and variables to obtain accurate results. Planning inventory can be challenging for businesses that function across different sales channels. Organizations must maintain optimal stocks across different warehouses and inventory, making things more complicated. Demand fluctuations and seasonality should also be considered when planning inventory to avoid overstocking or understocking.
- Limited Visibility – If you do not have proper visibility to keep track of the stock in the inventory, it can result in incorrect and delayed shipments. Businesses should be able to locate where the stocks are kept and which warehouse and distribution center has how much stock. It is essential for smooth warehouse operations, and enterprises can ship orders faster.
- Various Channels/Locations – Maintaining inventory across several locations is difficult, and without proper inventory replenishment methods, you cannot comprehend which products should be stored at which location. Tracking inventory at store → warehouse /channel → distributor level for multiple products is really time consuming.
Stocking inventory in the wrong place can result in extra shipping expenses and lead to a bad customer experience, as the delivery of the products would get delayed. A malfunctioning packing process would lessen the efficiency and increase travel times across the entire supply chain.
- Demand Inconsistency – Customer demand is constantly changing, and stocking too many goods would lead to overstocking. On the other hand, stocking very little would result in out-of-stock situations, and companies would not be able to meet demand at the right time. Every SKU unit should be considered separately, and order strategies should be formed for each by leveraging inventory planning software. It can help to meet fluctuations in demand. Forecasts are not easy, and businesses must have accurate KPIs for assisting inventory planning. Even after utilizing analytics tools, a certain amount of guesswork is required. Fluctuations in consumer demand make the process even more complex.
- Gaps in Data – For accurate forecasting, a significant amount of data is needed from various sources, and collecting the data is challenging. Inventory managers should gather historical sales data and reports that may be present in different systems. Data related to accounting, suppliers, sales orders, point-of-sales, and fulfillment is necessary for planners. Data collection requires time, and any issue may result in wrong forecasts, such as overstocking, understocking, or lost sales.
- Manual Error – Companies may not fully depend on technology, and a planner is necessary for managing inventory replenishment. When the employee is replaced, a significant amount of data needs to be passed on to the new employee, who would undoubtedly lack the reasoning skills of the previous employee who has worked with historical data. Employees should be skilled and trained adequately to put the inventory planning software to its full usage. Without proper usage, nothing fruitful can be achieved. The employees should maintain proper collaboration to balance procurement, production, and quality control.
How to Guarantee Efficient Inventory Planning?
- Selecting the Supplier – Retail businesses should choose suppliers who provide goods within the required time and present a good deal. Enterprises can automate inventory replenishment orders and reduce expenses locked up in low-demand products.
- Space Optimization in Warehouse – Organizations that function with different inventories and warehouses must ensure that they have the appropriate amount of inventory at the right place to ensure that order fulfillment can be met at the right time.
- Demand Forecast – Organizations can leverage promotions, historical sales data, market trends, seasonality, and KPIs to get accurate forecasts.
About Fountain9
Fountain9 assists companies in forecasting demand with their inventory replenishment software, Chronoscope. With the results generated, the companies can store an optimal amount of stock across all the distribution centers to fulfill orders at the right time and satisfy customers.
