Is your marketing being sabotaged by poor inventory planning?

#1 on our list of logistics best practices is:

 1. Inventory is planned according to the best information available from forecasts of known accuracy and market information from suppliers, marketing, the sales force and customer feedback.

There is no more important activity in the whole of supply chain than inventory planning.  Correctly determining when and how much stock should be procured will impact every other supply chain activity and affect the value an organisation provides both in cost and service delivery to the market.

Inventory planning must be in line with your inventory strategy which is a key part of your supply chain strategy which must support your business strategy. Inventory planning is at the heart of fulfilling the marketing promise.  

• What are you promising to your customers? 
• Do they expect you to have stock available for immediate courier
  delivery if required? 
• Or are they prepared to wait a few days whilst you ship it from your
  overseas warehouse because they know you are the cheapest? 
• Do you even communicate this to your customers? 

Personally when I shop online (unless they indicate otherwise) I expect a local vendor to have stock and ship today or the next day and have my delivery in a day or two.  I am surprised more often than I would like when I discover that my delivery takes a week or so before it arrives.  Telling me my order might ship in 10 days’ time from a warehouse in Hong Kong (when I thought it was shipping locally tomorrow) after I have completed the checkout is a moment of disappointment not a Moment of Truth.

The same principle applies regardless of your industry, whether the sale is online, B2C, B2B, phone or email.  Frustration is prevented by clear communication.  You are more likely to get repeat business when you communicate and then deliver what you promise and build trust with your customers.

Once you have the right inventory strategy in place then you need to support it with the right processes and systems that will ensure you keep sufficient stock to meet customer demand most of the time.  This is your service level and it is simply the percentage of the time you are able to fill orders within the promised time frame.  Depending on your market and the product category you want this to be 98-100%.  With a modern and sophisticated forecasting and planning system you will be able to manage this with great reliability, but even a basic system will do the job.  Most of the world still uses spreadsheets for planning or to assist the planning process even if they have a good ERP planning module.  Are you measuring your service level?

The right process means using the best information including an accurate forecast, appropriate safety stock that takes account of variations in customer demand and any information from the market that may impact particular products.  For example if your competitor is having supply problems, the sales may come your way, are you ready?  Is one of your customers on a growth spurt and needing more stock?  Getting this information and preparing for it in your inventory planning is how you win new business and keep it.  If customers switch to you when your competitors let them down, you stand a good chance of keeping them. 

You can find out more about best practice logistics by joining The Warehouse Performance Initiative.  What are you doing?

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