Maintaining optimum inventory levels for your expanding Retail, F&B & Beauty business is a challenging endeavor. Consumer demands are not the same throughout the year, and the demand fluctuates due to seasonality, festivals, events, pricing & promotional changes, making it variable. This is where an automated inventory planning software can help businesses to maintain ideal stock levels.
Managing the inventory ideally is a difficult & challenging task. Stocking excess inventory (overstocking) can lead to increased costs and stocking little (understocking) can lead to risk of running out of items. You can manage your business growth effectively by adopting the best inventory planning practices with inventory forecasting software, thereby reducing overstocking and avoiding stockouts.
Secrets to Effective Inventory Planning
Here are a few ways to plan your inventory efficiently and significantly expand your business.
Master Your Lead Times
Lead time is the duration between the day you placed the purchase order and the date when the supplier delivers the goods. It has a significant impact on inventory planning. The main aim of the inventory is to cover the supplier’s lead times. If suppliers could supply goods to the warehouse in zero days of lead times, keeping an inventory would not be necessary. Retailers can save the entire cost, but it is not possible. Therefore, the aim remains to reduce the lead times to the shortest possible for meeting consumer demand and lessening the time between reimbursing for stock and getting the revenue. Like this, you can plan the correct stock levels in your inventory and prevent stockouts.
Adopt Inventory Planning Solution
Maintaining a steady inventory with optimum levels without overstocking can be difficult. If you stock little, you may have to face stockouts, resulting in unsatisfied customers, which will not suit your business, and you will incur losses. Whereas, if you are overstocking items, you need to pay for the extra expense, which will take up a lot of space.
With a good inventory planning software, you can avoid this from happening. You can have insight into low inventory levels and quickly detect which specific items need to be ordered and can therefore avoid the event of stockouts.
Consider Reorder Points
Reorder point is the quantity of stock below which the stock should not go. A perfect inventory reorder point includes the time required to place an order before the time the stock reaches the threshold. If one of your items has reached the reorder point, you should immediately place a replenishment order. The advantage of reorder points is that there is no scope for stockouts.
You can calculate the reorder point by calculating the lead time demand days and estimating safety stock in days. The sum of safety stock and lead time demand produces the reorder point. Every product has different reorder points as each one has varying demand rates and replenishment delivery times.
Use Accurate Demand Forecasting
Accurate demand forecasting from the historical sales data reports can help reduce stockouts and overstocking. You can order stock that will meet the consumer demand and minimize the inventory expense as overstocking and understocking can be prevented. Additionally, data analysis allows you to estimate the correct size of your inventory and make well-informed decisions based on the data of previous months. This way, you do not have to order large stock quantities, and it will be just enough to meet the demand. Analyzing your business trend enables you to maintain the ideal stock.
Vendor Managed Inventory
In vendor-managed inventory, a retailer shares precise details with the supplier, and the supplier maintains a particular inventory level. It removes the burden of inventory planning daily and replenishment orders, and you can concentrate on expanding your business. It always ensures an optimum stock, and you no longer need to order products at the last minute or have to worry about whether the suppliers can deliver the stock without fail. You can minimize safety stock levels this way, as the supplier manages the resupply lead times, leading to saving costs.
Integrate a Just in Time Inventory System
With a Just in Time inventory, you do not need to maintain any inventory in your warehouse, and you can order everything when you need it. JIT means having all the right products at the correct time in the required place. You do not need to maintain any safety stock as you can get it instantly as you place an order and not have to wait for months and weeks before receiving the order. However, JIT can lead to stockouts as it works with low inventory levels. A JIT inventory may not fulfill a sudden hike in customer demand.
Dynamic Safety Stock
Due to fluctuating consumer demand, incorrect demand forecasting, and differences in lead times, stockouts occur. You can allay the risk of stockouts by maintaining a safe stock level and extra inventory to avoid stockouts.
It is not easy to perform many of the functions mentioned above and only with the help of a good
Inventory planning Software one can ensure an optimum inventory.. This is where Fountain9 helps retail companies to plan inventory efficiently with their AI-based inventory forecasting software that predicts the correct demand forecasting and allows companies to maintain an optimum inventory. Inventory forecasting software can help track the stock levels and reduce overstocking and stockouts.