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Inventory Planning Basics
5 tips for securing your Soak inventory.
Inventory planning is an essential aspect of managing any business that sells products. By understanding these inventory planning basics, you can improve your supply chain management, reduce waste, and ultimately increase profitability.
Tips for Inventory Planning
Here are 5 tips for planning your Soak inventory that helps ensure you have the right stock at the right time to realize (an increase!) your sales goals:
→ 1. Forecasting
The first step in inventory planning is forecasting. This involves predicting demand for the product based on historical sales data, market trends, and other factors (think upcoming holidays / busy periods, events etc.).
Forecasting can stay as simple or get as complex as you like. The important point is to make your best estimate of your upcoming inventory needs. By accurately forecasting demand, you can avoid stockouts (which mean missed sales) and overstocking (which puts a strain on cash flow and/or physical space in your warehouse or stock room).
→ 2. Safety Stock
Safety stock is the buffer inventory that a business keeps on hand to prevent stockouts. It’s important to maintain an appropriate level of safety stock to ensure that the business can fulfill orders even if demand is higher than anticipated.
→ 3. Re-order point
The re-order point is the minimum level of inventory that triggers a new order. To determine the re-order point, businesses must consider lead time (leave 1-2 weeks for Soak orders to allow time for delivery and any unexpected delays), safety stock, stock required for in-store display*, and expected demand. This helps ensure that new inventory arrives in time to meet demand while minimizing excess inventory.
*When determining the ideal amount of stock to keep on hand at any given time, don’t forget to allot for merchandising and in-store displays so you can always keep your Soak displays full and inviting.
→ 4. Inventory turnover (stock turn)
Inventory turnover (otherwise known as stock turn) is a measure of how quickly a business sells its inventory— i.e. the number of times the inventory is sold or consumed during a given time period, typically a year.
Stock turn is calculated by dividing the cost of goods sold (COGS) by the average inventory value. A high inventory turnover ratio indicates that the business is selling its products quickly and efficiently*, while a low ratio may indicate a business is carrying too much inventory or experiencing slow sales. By monitoring inventory turnover, you can identify opportunities to optimize stock levels and improve profitability.
*A note on a high stock turn:
There IS such a thing as turning too fast. If your stock selling out faster than you can replenish, your stock turn will be very high, AND you are likely losing sales (i.e. you run out of inventory or of a full selection of products and fragrances before your re-order arrives and is put on the floor).
This is a good time to re-assess your safety stock – if you’ve had sales increases month over month, your safety stock level may need to be increased to your new levels. Or you should consider ordering more at a time to cover sales for a longer period.
→5. Bundling & Cross-selling
When planning inventory for add-on items like Soak, businesses should considering bundling and cross-selling opportunities. Bundling involves grouping products together and selling them as a package deal. Cross-selling involves suggesting complementary products to customers – two of the sales strategies that are proven for Soak sales success.
Bundling and cross-selling can increase your average order value and move inventory more quickly. However, it’s important to ensure that inventory levels are sufficient to support these strategies.
If you have questions about securing your ideal inventory level of Soak products for your shop, be sure to reach out to your rep or Tanja at Soak head office. We’re here to help!