In a field like ecommerce, which demands stringent management of products and raw materials, keeping inventory is crucial. A company’s inventory management practices should always be aligned with what it produces, what it sells, and what it sources from suppliers. For that reason, wise entrepreneurs choose to do inventory planning, or planning that considers the optimal quantity, timing, and inventory cost of each of their items. Concrete examples of inventory planning are deciding how much of an item to have on hand per month and scheduling a restock.
Given the logic behind inventory planning, you might assume that it’s the default approach for every business to take. However, this is actually far from the case. A number of businesses still make the mistake of overstocking products and materials in a bid to play it safe. Unfortunately for them, this can cause inventory costs to skyrocket. It also increases the risk of goods being damaged, stolen, or spoiled while they pile up in the warehouse.
As an entrepreneur in such a competitive environment, you can’t afford to play it safe that way. You should always choose to be accurate about your inventory management. Here are the reasons why you should pay attention to your business’s inventory planning.
- It isn’t difficult to execute inventory plans with the wealth of solutions currently out there. It’s true that planning exact inventory conditions is a challenge. If you do it on your own, it will take some practice to get it right. But nowadays, businesses can also outsource inventory solutions like ecommerce fulfillment services. Getting ecommerce fulfillment services for your customers could be a big help to the inventory side of your business, as it optimizes order fulfillment, inventory tracking, shipment, and delivery all at once. So, there are actually several ways that you can rework your inventory management for the better, and investing in ecommerce may be one of them.
- Inventory planning will optimize your business’s cash flow. Putting emphasis on smart inventory planning, as opposed to overstocking for safety, will surely save your business a lot of money. It will prevent over-budgeting for inventory costs, thus freeing up funds for other business expenditures.
- Inventory planning results in more accurate business forecasting. A solid inventory plan will be based on the most accurate projections possible, which are backed by data instead of guesswork. Having a good grasp of the inventory data will also result in more exact forecasts for sales, as well as expected costs for purchasing and production.
- Inventory planning will help you pay attention to each one of your products. Some companies don’t put enough thought into what their products are like, when they’ll be at the peak of demand, and when they should be restocked. While so-called “evergreen” products can sell all year round, some products (such as Halloween costumes or Christmas ornaments) only peak during certain seasons. The smart entrepreneur will use inventory planning to determine the right amount and right timing to restock, instead of letting products sit around and eat up inventory.
- Inventory planning will deter employees from stealing or mishandling product. Any business owner would want to think the best of their employees, but lax inventory plans and policies may result in theft or negligence. At best, the warehousing staff may be complacent about handling products because they think that there are spares around. At worst, they may pocket items for themselves because it would be hard for the management to track the losses. Having a clear inventory plan, a real-time tracking system, and strict policies will keep employees on their toes. They’ll know the value of each item currently in the warehouse and thus be extra careful with the stock.
Now that you know the value of inventory planning, it’s about time to put such plans into practice. Best of luck in reworking your inventory plans to be more responsive, accurate, and profitable to your business.