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Optimal inventory management thanks to well thought-out demand planning

Optimal inventory management thanks to well thought-out demand planning

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Stock shortages or overstocks are an essential risk for every retailer. A well thought-out ordering system with demand planning that ensures optimal replenishment of all products at all times is therefore indispensable. In this article, our partner Pickware explains the basics of ordering, the most important process steps and what you should consider from demand planning to purchase orders.

What is ordering all about?

Often, purchase orders are still made according to gut feeling, rough estimates or rigid stock limits. But with increasing sales and a growing number of branches or sales channels, it becomes more and more difficult to keep track of the available stock and the anticipated demand.

Let's say you run an online shop with sports supplies and some of your goods are in much higher demand in summer than in winter months. Now a customer orders a longboard at the beginning of January, which causes the inventory of longboards to reach the reorder level. When reordering on the basis of rigid stock limits, it can now quickly happen that you reorder 100 longboards in order to reach the stored target stock. However, if you look at the sales of the previous years, you will notice that the demand for longboards will probably not increase again until April and that you can hardly expect further sales before then. In order not to tie up capital unnecessarily and block storage space, it would be a better decision in this case to dynamically adjust the reorder quantity based on the expected sales figures instead of relying on rigid stock limits.

The ordering system should therefore support you as a retailer in making optimal use of your warehouse space and be prepared for both peak loads and lulls. An intelligent and automated ordering system not only saves you time and nerves, but also ensures happy, returning customers.

Important components and processes in ordering

Demand planning is a fundamental part of ordering. However, in order to always reorder the right products at the right time and in the right quantity, and to have as little manual effort as possible, there are a few more details to consider.

Taking advantage of stock warnings

Another practical advantage of an automated ordering system are stock warnings. They inform you as soon as the stock of a product changes and reaches a defined stock limit. For example, you can set a value for the reorder level of a product and you will be notified as soon as this is reached and you should reorder the product in a timely manner. An optional safety stock, which is below the reorder level and is not available for sale, also provides a buffer for simultaneous sales via different sales channels or until the next purchase order arrives. A stock warning can also indicate that it is time for a promotional discount and warn you when former bestsellers become bums.

Stock warnings therefore have several advantages: You keep an overview of your stocks even if you have several warehouses or branches, avoid shortages and overstocks and at the same time relieve your employees by reducing manual effort.

Forecasting future demand

In order to forecast your customers' demand, you need a method that predicts your sales as reliably as possible. In addition to rigid inventory limits, dynamic demand planning that calculates your product-specific demand based on your sales history is often advantageous. This makes it easier to estimate the expected demand for products based on sales figures and to create the necessary purchase orders at the right time. It is important that the forecast period is freely selectable, so that you can react to the most varied dynamics. The longer you have been selling and the more constant your sales figures are, the better you can estimate the expected demand based on past sales figures. If you are just starting your online business or your sales figures are increasing very quickly, you should preferably consider a short comparison period when planning your demand so that you can react flexibly and gradually increase your reorder quantities.

With the dynamic method, you reduce storage costs and avoid cancellations that can occur due to dissatisfied customers with unplanned long waiting times for oversales. At the same time, you save your employees a lot of stress and avoid unnecessary additional costs, as no more delivery bottlenecks should arise that require short-term reorders from the supplier with express surcharges. Goods with a lower stock turnover rate are also detected more quickly with this method and can be reordered in adjusted quantities. 

From the order proposals to the purchase order

Following the demand forecast, it is as simple as possible to place the actual orders. Taking into account various factors such as minimum order quantities, purchase intervals, delivery times or purchase prices, the appropriate supplier is selected automatically at best and the final order quantity is determined so that the desired orders can be created with just a few clicks. These should also be managed as easily as possible afterwards. Automated e-mailing to suppliers and system-supported storage of the goods reduce the manual effort. When entering and storing goods, for example, a comparison between ordered and delivered goods should be carried out. In addition, open purchase orders should be taken into account in the system for further repeat orders and it should be possible to see at any time when they are expected to arrive.

Conclusion: Uncomplicated ordering thanks to automated processes

Traders should rely on an ERP system with an uncomplicated ordering system as early as possible. Demand planning should be as simple as possible for you as a trader so that you always have the optimum stock in stock and can easily and automatically reorder goods at the right time. In addition, an ERP system helps you to keep track of your stocks centrally and to reduce the manual effort.

Webinar: Ecommerce made easy – with the right ERP system for Shopware 6

Would you like to get a live insight into the ordering system in Pickware ERP Starter for Shopware 6? Then register for the German-speaking webinar on 10 June at 11 am. In the webinar, Pickware will explain to you the basic requirements of an ERP system and, in particular, highlight the processes around inventory planning and purchasing in a practical manner using the example of ERP Starter for Shopware 6.

 

To the German-speaking webinar

 

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