4. What Are The Challenges of Inventory Planning?
Inventory planning can become increasingly challenging when a retail business or organization has multiple channels with multiple warehouses. Also, fluctuating demand and seasonality must be considered. Making sure your store has enough product in stock but not too much stock are the main inventory planning challenges you will encounter.
Inaccurate inventory tracking
Small businesses often start their inventory management with a manual tracking system. The small volume of inventory may make them think an automated system is unnecessary. But many owners don’t realize that manual inventory planning or the use of spreadsheets and paper are inefficient, time-consuming, and prone to human error. In addition, due to limited visibility in warehouses, it can be challenging to identify or locate your inventory.
When you track inventory across multiple channels, it means you have no way to view the data in real-time. To keep budgets down and stay profitable, it is necessary to know how much inventory you have on hand at any time of the year.
Technology is not the be-all and end-all, no matter how robust the inventory management software you use. For companies with giant warehouses, inventory planning is controlled by an inventory planner. When this person is replaced by a new inventory planner, there is a lot of historical knowledge that must be passed on to the new person in charge.
The new planner will not initially have the internal knowledge of the outgoing planner and may have difficulty grasping the historical reasoning underlying the current inventory management system.
In addition, you need to make sure that your staff is appropriately trained to use the software. Poor staff training will negatively impact management and lead to calculation errors. In addition, poor communication between procurement, production, and quality control managers will ultimately affect your company’s performance.
Excess inventory is just as damaging as a lack of stock in your store. Overstocking increases not only the cost of storage but also the space. If you own a grocery or convenience store, the likelihood is high that you sell perishable items such as food, making it even more important to control your inventory effectively.
See also: 5 Essential Features For Inventory Management for Convenience Stores
Conversely, if your inventory levels are low, overselling and out-of-stock problems maintain customer satisfaction. Not knowing your exact inventory levels at any given time makes it difficult to plan how much inventory your business needs.
Facing fluctuations in demand
As a retailer, you must constantly deal with fluctuations in demand throughout the year. Increased customer orders are usually seen around the holidays, especially when you run promotions. Poor ordering strategies will impact your ability to meet these changing demands and even result in stock-outs.
With a demand forecasting tool, retailers can project inventory management software into the future. These functions integrate with your accounting and sales data to help you anticipate demand and place orders based on changing customer needs, seasonal fluctuations, or product availability.