Inventory planning is one of the most essential steps to improve inventory management in any business. But most companies need the right strategy to execute it. Businesses keep stocks, product demands, and raw materials in check for better inventory management.
Inventory planning is a must for companies to reduce wastage and benefit from all resources properly. With proper inventory planning, businesses can maximize profits.
In this article, companies can understand why it is important to plan inventory and what is the appropriate approach to do that.
What Is Inventory Planning?
Inventory is something that includes everything produced by a manufacturing plant. All the sellable products are stored in warehouses after production, and with the help of SKU, managers identify products. Inventory is the most important asset for a company.
Businesses hold inventory to maintain a timely supply chain and fulfill product demands on time. In the manufacturing industry, keeping enough stock helps businesses to avoid delays and ensure cash flow.
Most companies maintain inventories to benefit from bulk orders at discounted prices by using the planned list.
Why You Need to Implement Inventory Planning?
The need for good inventory planning has many advantages. The sooner a business plans future inventory, the sooner it can benefit.
- With the right strategy, companies can reduce stockouts and overstocks.
- Consistent inventory flow helps companies to maintain cash flow with better turnover.
- Businesses also have better production and increased profits with the right inventory strategies.
- A planned inventory can easily spot dead stocks and slow-moving products that help streamline stores.
How to Develop an Inventory Plan?
A plan is a strategy that helps companies to make well-thought-out decisions. These plans outline the process that the business follows to manage inventory.
- A good inventory plan includes details about the overall list that helps various industries make more informed decisions.
- The elements on which the inventory plan is based differ from industry to industry. It includes the product volume the warehouse receives or dispatches, warehouse management, price cuts, and demands the companies fulfill on average.
- Companies can dispatch more products and gain economic benefits with better storage space.
- Using all resources most efficiently can help businesses achieve more profits and attain production efficiency.
Inventory Planning Systems
Companies use various inventory control systems to improve data analysis and control of inventory. A suitable inventory management system can help businesses focus on all warehouse operations and tracking products better.
Some companies with multiple warehouses also use warehouse management software to manage operations more smoothly. Some other companies use Excel as a planning tool to plan and track inventory. But Excel is only helpful to those businesses that are small-scale.
Overall, companies can forecast future sales accurately with inventory planning.
The Importance of Inventory Planning
Good inventory planning goes hand in hand with better profit margins. Businesses can face stockouts or overstocks. A detailed strategy to reduce any such losses unique for each company should be planned that outlines all issues in the production line.
Correct inventory management helps businesses achieve customer satisfaction, reduce operation costs, and improve relationships with suppliers and customers. The right strategy allows companies to avoid shortages and maintain warehouse space problems.
When Does Inventory Planning Take Place?
Inventory planning is not a one-time activity. It requires updates and coordination with day-to-day operations. Usually, companies do inventory management multiple times at different intervals.
1. Pre Season
Pre-season is the time companies use demand forecasting. The company calculates the production quantity with the help of previous sales, ongoing trends, and seasons. It helps companies to identify the amount of inventory needed to reorder material.
2. In Season
Once production begins, companies change a few strategies to maintain the quantity of production as per demand. If reordering extra inventory is necessary or products are not moving, managers should stop their production.
3. Post Season
After the season, a good planner will discuss the outcome and profit of the season. This step will help in future planning and demand forecasting.
Inventory Planning to Maximize Your Success
Achieving the target inventory level requires good planning. With the proper inventory process, production will become more smooth and profitable. It also helps to simplify the supply chain and predict future sales.
Inventory management has many components, like ordering stock, selling products, and reporting taxes on time. Tracking sales even during production also saves businesses from avoiding overstocks or stockouts. The right production quantity requires data analysis and regular sales updates for better forecasting.
Improve Inventory Planning With TranZact
TranZact helps forecast demand accurately and efficiently manage inventory to reach target goals. With timely restocks, regular maintenance will increase revenue and better manage the production process. With TranZact, experience hassle-free inventory management and maximize your profits quickly.
FAQs on Inventory Planning
1. What is Inventory Planning and control?
Inventory planning and control is estimating and forecasting future demand and establishing production efficiently. This concept helps businesses to maintain customer satisfaction and avoid any issues in warehouse management.
2. What do you mean by demand and Inventory Planning?
Demand planning is the forecasting of demand for future products. It helps to produce items only according to orders.
3. What is the strategy for replenishing inventory planning?
Inventory replenishment systems help businesses maintain inventory with the right amount of stock, calculate safety stock, and reorder points appropriately.
4. Which is most commonly used in demand and Inventory Planning software?
Excel is the most commonly used demand and inventory planning tool businesses use. Google spreadsheets and Excel help businesses with inventory management solutions.
5. What are the types of inventory?
There are four types of inventory:
- Raw materials
- Work-in-progress
- Finished goods
- MRO inventory ( maintenance, repair, and overhaul)
6. What is the objective of inventory planning?
Inventory management and planning help businesses produce products efficiently to fulfill customer demands. Its main objective is to increase profitability and ensure stock availability as per demand.
7. What is non-moving inventory?
Non-moving inventory is the products that sit on warehouse shelves longer than expected. These products are no longer needed or in demand in the market.
8. What are the benefits of inventory management?
Inventory management has many benefits.
- It helps businesses to improve their accuracy
- Reduce costs and enhance customer service
- Helps with better production management and supply chain operations.
