When you run an online business, you must have a clear plan of what inventory you will need. Managing the inventory is difficult and error-prone. Improper forecasting can result in over or under-stocking. In addition, you might be missing out on some valuable sales opportunities. Because of the complexity of supply chains, modern ecommerce merchants may be pulling inventory from several locations. A strategy of inventory planning will help avoid such complications and maximize productivity.
A proper inventory planning system will streamline your operations and minimize human error. An efficient inventory management system will also streamline your replenishment duties. A well-designed inventory management system will keep overall overhead and ordering costs low. Effective inventory planning requires a large volume of data. While a pen and paper approach may be adequate for small businesses, it can become cumbersome as you grow. Human error is also a major problem, making manual inventory management an error-prone process. To avoid this, you should invest in a robust inventory planning software. An inventory management system will give you access to numerous features, such as stock alerts, automatic purchase orders, year-end inventory reporting, and user permissions.
You can also analyze your demand fluctuations in different markets. For example, if you are selling swimwear, you may want to store most of your products in Florida to avoid shipping costs to far-off regions. Another example is if your customers are located in Europe and the UK. Then, you can plan your supply chain according to their needs. The more you know about your customer, the better. You can use Google Trends to monitor the changes in demand and interest.
To create an inventory forecast, you must have some past sales data. This data should be detailed enough for you to see seasonal changes. You should also have some historical data on your products. Using historical data for this purpose will help you shape the forecast. If you have strong growth potential, you should consider seasonal changes in your demand and use data-driven inventory management. For example, you might not want to use economic order quantity for your product if you’re trying to grow your business quickly.
To optimize the performance of your ecommerce business, you should set a minimum viable stock level. The goal of minimum viable stock levels is to keep your customers satisfied, and minimize any delays in fulfilling their orders. You should be aware of the demand for your products, as well as how long it takes for out-of-stock inventory to be replaced. With this knowledge, you can make the necessary adjustments over time. If there is not enough demand, you should reduce your inventory levels.
Besides maximizing your profits, inventory planning is vital for the smooth functioning of the supply chain. It helps you to order the right amount of inventory at the right time. Moreover, it helps you avoid overstocking and other issues that may arise. It also helps you to reduce operational costs and promotes a more steady workflow of your supply chain. With these advantages, inventory planning is essential for any business. You must be able to adapt and pivot to the changing market conditions.