Are you wondering how to start planning your inventory? The key to inventory optimization is a buttoned up process that can scale. Below are 4 simple steps you can take to get started with demand planning and inventory management.
#1: Establish your process
We covered this briefly in our 4-step approach to demand planning. In short, you’ll want to have a repeatable process involving real-time data importing, cross-functional inputs, and total business alignment. The skillset of planners goes beyond predicting inventory needs. Having a set process will facilitate your workload through predictable times and provide a baseline for the unpredictable moments. Having a plan for a plan is ironically the key to inventory success.
#2: Set up goals
What’s a plan without a goal post? If you’re just starting out with planning, one of the first things you should consider is what you want to achieve. Are you aiming for a set number of sales? Are you building customer loyalty and retention? How much are you willing to invest and what is your ideal return? These are all questions you should ask yourself as they will influence your business and product strategies, inventory purchases, and product assortment. Since inventory is often the biggest if not the second biggest area of investment, the decisions you make here will influence other things like overhead, selling locations and methods, and much more.
#3: Implement systems
When you’re a growing business, every resource has a cost to benefit value. When it comes to people, having a strong planner will yield immense returns. But with growth comes growing pains and you’ll soon find yourself stretched too thin. Managing inventory budgets is the last area that should tolerate this as every dollar spent here can either lead to or challenge profitability.
There is a point at which implementing systems will yield a greater return - saving you time, energy and frustration. Have a plan in place for what this trigger point might be so that you don’t find yourself scaling with complicated and unnecessary processes. With the right tools in place, you can avoid human error and scale your business much faster.
#4: Keep your team informed and involved
Accountability is important whether you’re a team of one or one hundred. Because inventory touches almost every aspect of a business, a key step in closing the loop and setting yourself up for constant improvement is to keep your team informed and involved.
Ensure the appropriate parties are incorporated from forecasting to sale. A cadence and format to communication across teams will help strengthen this relationship and in turn, your total business planning process.
Improve over time
While this isn’t a step in getting started, it will certainly be a result of consistent trial and error. Inventory planning can be overwhelming. The nature of forecasting is that you are always wrong, and it’s just a matter to which degree. Setting yourself up with the right processes, tools, and goals will help you finesse your inventory over time and in turn lend itself to supporting your profitability goals.