Inventory is an important part of the business. It does not matter if your business is big or small. Inventory can make or break your business that is why inventory management is crucial for business.

Inventory varies from the business-to-business model for some organizations such as retail inventory is a major part of the business. In some organizations, inventory can be some type of spare parts such as vehicle parts.

For a manufacturing company, inventory can be raw material. So, inventory varies from one business to another business.

However, in business you need to ensure that inventory is utilized completely otherwise it can be lethal for business. Therefore, inventory planning is also important.

What Is Inventory Planning?

Inventory planning can look very hectic because there are several questions you have in mind! How much inventory shall need to keep how much we need in hand. What will happen if we have a stock-out issue?

Inventory planning is done so that no inventory wastage occurs. Inventory planning is important for inventory optimization. It allows organizations to determine & order inventory quantity.

The aim of inventory planning is done according to the production and sales capacity, it should be neither too much nor too little. If inventory planning is done right, then business success chances are better and it can also assist in inventory forecasting.

Also Read: What Are the Objectives of the Inventory Management System?

What Are the Benefits of Inventory Planning?

The benefits of inventory planning are discussed below:

Benefits of Inventory Planning

1. Better Cashflow

Stock control and arranging to permit independent ventures to deal with their income openings. SMEs aren’t generally ready to buy a lot of stock, because of restricted capital.

By having better control of their stock, they can know precisely how much stock they will require and when they need it. This can let loose other funding to re-put resources into different spaces of the business.

2. Enhance Profit Margins

You can make a smart decision with the help of data you can start making variations of fast-selling products.

This will help increase sales numbers and when sales numbers increase profit margins will increase as well.

Other products which are not selling you can either eliminate them properly or improvise them.

3. Increased Productivity

Productivity is very important for instance lots of time is wasted on labor when they count inventory stock and verifying them. You can use inventory tags, it simplifies the inventory & asset verification.

Moreover, labor can quickly verify assets & inventory with help of a scanner. As each inventory is stickered with an asset tag that has a unique identification number and that is stored in automated software.

Each label comes with asset tracking techniques such as barcode, QR Code (Quick Response Code), RFID (Radio-frequency identification). Whenever the label is scanned it automatically fetches all the information.

4. Reports and Statistics

You can get analytics that is helpful in business growth. They provide crucial data that assist in business growth. For instance, you can find out your fast selling product.

A business insight such as this allows you to make smart, strategic informative decisions.

Also Read: A Variety of Inventory Management Methods to Enhance Business

What Are the Best Practices of Inventory Planning?

Below we have mentioned the best practices of inventory planning:

Best Practices of Inventory Planning

1. Avoiding Overstock & Stock-Out Issues

Stock-out is one of the most common issues which can be avoided with inventory planning and other techniques. It can be very lethal for business, lots of organizations suffer from losses due to these stock issues.

Some organizations purchase stock more than they can sell as a result their inventory cost expenses increase and profit margin decreases.

Similarly, other organizations suffer from a lack of stock as they do not know their stock is finished as a result, they lose sales and potential customers as well.

2. Setting Reorder Levels

One of the most basic rules, in order to perform effective inventory management, is setting the re-order level.

Fort this purpose data consumption history is utilized, and the pattern is analyzed so that you can have an idea of inventory and set inventory limits.

Whenever inventory goes below that number you can start the inventory refilling process. However, you must keep checking it regularly otherwise it will be no good for your business.

3. Invest in Automated Software

When you have inventory management software it provides tremendous advantages. For instance, once you set inventory level it makes the process automated which means it will alert you whenever inventory goes below the defined level, and you can start the refilling process.

With automated software, you don’t have to check manually. When the process is automated it decreases human dependencies and improves accuracy.

Automated inventory management software provides several other benefits that can be very productive for the organization. It is helpful in streamlining the purchase order process and helps in effective stock management.

This software also keeps track of inventory and avoids theft and misplacement. According to Forbes, “shrink, or loss of inventory related to theft, shoplifting, error, or fraud, is reducing the bottom line by $46.8 billion across the industry.”

4. Utilize FIFO Method

First in first out is a method that is crucial for inventory planning. It avoids inventory from wastage, as the name suggests inventory comes first goes, first out.

If you sell costly inventory items, then FIFO becomes even more important. Expensive inventory can be spoiled, or they can be expired.


Inventory planning is an important part of inventory management if you want to optimize the inventory management process then inventory management software is a must. Inventory management software makes you more efficient and provides a complete view of inventory.

You can get better control over inventory and visibility with this software. You can also get data of inventory purchases and sales in real-time occurring in the organization.

Also Read: What Are the Benefits of Using a Utility Monitoring System?

Frequently Asked Questions (FAQs)

1. What are the inventory management techniques?

Inventory management techniques are discussed below
1. Just in time
2. First in first out
3. Cycle counting
4. ABC Analysis
5. Drop-shipping

2. How can you control inventory?

Inventory control can be done by safety stock, avoiding deadstock, reorder point formula, inventory forecasting. With inventory management software assistance, you can control inventory.

3. What is drop-shipping?

Drop-shipping is an approach used by organizations in which organizations do not handle inventory by themselves instead they hire third parties. It is done when organizations want to focus on growing business. Third-party sends inventory to the customer whenever required.