Inventory stores products and items that serve the needs of consumers. Manufacturing companies procure raw materials, finished products, and items required to produce the new products.
Most businesses have an inventory to support the business and deliver goods to customers timely. Inventory is one of the crucial assets of organizations and is required to maintain an organized warehouse for better efficiency and time management. Retail companies and production units can operate independently without interruptions by keeping a well-planned inventory. They can also address rapidly changing consumer demands. Moreover, adequately managed inventory allows companies to schedule outputs flexibly during manufacturing operations.
Inventory planning solutions allow companies to buy the correct amount of stock and decide when to reorder. Inventory planning assists in minimizing the costs of maintaining stocks while ensuring that there are enough goods available for producing and selling. It is a significant part of supply chain management that ensures goods, whether raw materials or finished products move smoothly from the source or factory to the customer.
Essential Aspects of Inventory Planning
Inventory planning systems directly affect the flow of cash and corporate profits. It takes care that stockouts are avoided so that production can be kept running and money is saved on expensive last-minute purchases. In addition to this, it allows discounts on regular and bulk orders. Proper inventory planning demands the right blend of people and inventory planning solutions.
Inventory Planning Technology
Stock planning software ensures that you maintain a stock appropriately without overstocking. Inventory planning systems provide digitized historical data for predicting demand and provide insight into the present inventory levels. You can accurately scale your business with AI-based software.
Roles and Responsibilities of Inventory Planners
Inventory planning systems make analyses of trends and patterns and provide predictions. Inventory planners coordinate with purchasing and supply managers, contract management leaders, financial analysts, quality control, and production stakeholders. They monitor and review existing inventory, create a manufacturing schedule for producing goods to meet the market demand, collaborate with sales teams and vendors to analyze current trends, organize existing inventory and work out ways to avoid overproduction. In doing so, inventory planning software can be pretty helpful for the inventory planners in carrying out their duties without any hassle.
Policies, Processes, and Procedures for Inventory Planning
Inventory planning systems enable you to create purchase plans and maintain visibility for your current inventory. You must document your inventory planning processes and convey them to the entire organization, especially the supply chain unit. The procedures depend upon how enterprises use the stock planning software to pick and store items.
Despite the benefits of stock planning, many businesses do not resort to inventory planning, thereby incurring losses due to excessive goods or shortages of stock when demand rises.
Objectives of Inventory Planning
The priority of any business is to satisfy its customer demand while making profits. In the case of inventory, if the correct product at a crucial time is not available to the customer, the business suffers by losing customers’ loyalty. Loyal customers are a huge asset for any business.
Effective inventory planning is required for:
- Forecasting– Demand forecasting is about predicting the future sales and how the consumer demand for each product will be so that all inventory requirements can be met. An essential part of forecasting is supervising inventory products to know their exact amount, comprehend usage patterns, and maintain optimum inventory levels.
- Cost Control– Inventory costs and storage and maintenance costs account for 20-30% of total funds. Holding products in the inventory adds up the cost of purchasing items, labor costs, taxes, inventory costs, and expenses related to security and insurance. It also includes costs for maintaining out of demand, old, or in excess stocks. Stock planning software aims to minimize all these cost elements.
Challenges in Inventory Planning
Whether for the manufacturing or the retail industry, there are multiple challenges faced in inventory planning. It is pretty difficult to anticipate future demands and sales, and you cannot reason out the demand requirements for a particular period. The most crucial aspect of inventory planning is comprehending the needs of customers. Some factors which challenge inventory planning are as follows:
- Disorganized Data– You need lots of data to predict future sales, often kept in more than one system. You may need to analyze data related to logistics, fulfillment, accounting, and other systems to get a complete picture, which can be time-consuming.
- Perishable Inventory– Some products come with an expiry date and get damaged over time. They require more effort in management as they get spoiled if not ordered for an extended period.
- Multi-channel Warehousing– Organizations have inventories over several locations such as warehouses, brick-and-mortar stores, and distribution centers. Tracking different sources makes order fulfillment and inventory management complex. Dispatching orders from multiple locations enhance shipping costs.
- Limited Communication- Some businesses pay no need to communicate, and the departments, such as production, quality control, and R&D, do not discuss inventory needs until problems arise.
Benefits of Inventory Planning Systems
Businesses can reap a lot of benefits from the stock planning software. These are listed below:
- Eliminate stockouts and overstocking and maximize profits.
- Stock optimization so that you can conveniently identify slow-moving items.
- Enhance cash flow through inventory planning. It is beneficial for small businesses that depend on fast turnover.
- Modify stock to display at the front to sell out perishable items.
- Increase profits with robust sales and effective production.
- Retrieve items easily from the stockroom and warehouse.
- Eliminate thefts and missing items and raw materials.
- Reduce excess inventory and redundancies that stay for long periods in the warehouse.
Fountain9 assists businesses in extracting optimum benefits from their AI-powered stock planning software, which helps businesses to predict demand accurately and efficiently so that they can gain a competitive advantage over their competitors and avoid overstocking or understocking. For more information, visit https://www.fountain9.com/