Feb 11, 2021
Time is money: 5 Practical steps to inventory planning in 2021
Set yourself up for success in 2021. Draw on last year's experience to confidently plan and optimize your inventory replenishment.
Your current reality.
As an inventory planner settling into this new year, navigating the disruptions brought on by COVID-19 can seem quite daunting. Many of these challenges will follow you well into the foreseeable future.
You can expect vulnerable supply chains to affect product availability from suppliers and, according to the latest Future Consumer Index report by Ernst & Young, consumers now fall into four segments of buying behavior and this, in turn, will add ongoing fluctuations in customer demand.
You hold a pivotal role in the business. You need to balance the demands of your suppliers and customers and at the same time, collaborate with various departments across your company to ensure inventories are at optimal levels to meet the business objectives and external demands.
Draw on your experience.
The impact of this pandemic created new demands for you to navigate. Delays in shipping or having to quickly change suppliers or source supplies from new territories added an immense amount of pressure and uncertainty on how to plan your inventory replenishment.
Drawing on your experiences and how you respond to these challenges going forward, places you in a strong position.
To meet the needs of current and future customers, it is vital to adapt last year's learnings to develop a high performing inventory plan that has:
- Less capital tied up in excess inventory.
- The right amount of inventory on hand.
- Optimal orders placed at the right time.
Forecasting is your friend! And, a software solution is your best friend!
If you don’t know what you are going to sell tomorrow, how can you decide what to buy today?
To confidently navigate these demands you need an accurate forecasting tool to help you formulate an optimized inventory plan.
An inventory management software solution provides the missing link you need to help extract accurate inventory data that will quickly highlight once-off sales spikes, identify problems, or intermittent demands.
Questions you should be asking yourself as you prepare for 2021:
- How can I improve my forecasting capabilities based on erratic or unexpected demand?
- How can I quickly make adjustments to my forecast when there is a challenge?
- How can I implement my company's inventory strategy in the individual line-item replenishment calculations? For example, target inventory turns and off-the-shelf availability, so I have happier customers.
Consider the following:
Do you have confidence in the accuracy of your inventory data? What is the inventory data telling you? This is a vital starting point for your inventory planning and will highlight the challenges you faced; what factors influenced your inventory in experiencing excess stock, delayed orders, or stock-outs.
Do you have a dashboard to review your inventory data daily? Staying ahead of daily demands means you need to have a visual dashboard display that instantly highlights your overall inventory performance and provides early warning of items needing attention.
Do you have the ability to isolate problem items? Typically, there are too many items to manage manually. Often, using spreadsheets that merely create lists is prone to human error, and more than often, the information isn't 100% accurate as you need to draw data from multiple sources. Investing in a software solution will be a game-changer for you. With the right inventory management software solution, you will be able to collect, process, and make data-driven decisions to focus your attention on the right inventory that drives sales.
Do you have confidence in the line item forecasts with an understanding of how to find suspect forecasts that need an urgent review?
Are you able to manage all the ‘noise’? You need to focus on doing your job well. Your day is busy expediting orders, addressing potential shortages, reducing your excess stock, and managing late deliveries. To help you prioritize your efforts, classifying your stock items will help focus your attention on 20% of your items that will give you 80% of your sales. Your best performing stock items are generally high demand items, fast-moving, and drive higher profit margins. Setting the appropriate inventory policies will also ensure all purchase recommendations drive your inventory towards a better balance, where you invest in the right stock item at the right time.
Let's explore some practical steps to help you mitigate potential risks and achieve a balanced inventory plan to save you time and help meet the demands of your stakeholders, suppliers, and customers.
5 practical steps you can take today to help save you time:
- Create an achievable inventory model that your management team subscribes to in terms of inventory turns and product availability.
- Ensure your inventory policy is represented in every line-item replenishment decision.
- Rank and isolate problem items daily.
- Every week, rank and isolate under and over-performing demand items.
- Identify actionable excess inventory and introduce target reduction initiatives with milestones, measurements, and responsibility.
Are you curious about the current state of your inventory? Take our 3-minute online Inventory Performance Quiz and learn how your inventory is performing today. Click on the image below to start.