Inventory Planning

Guide to Inventory Planning: Benefits, Tools and More

Inventory planning is crucial in retail, primarily when the business operates online. Globally, companies of all sizes and domains invest heavily in inventory planning.

Inventory planning sounds straightforward, but it can get tricky for medium to large e-commerce businesses if a robust strategy is not in place. The concept is vital to avoid likely issues with sales and fulfillment and uphold customer satisfaction.

Inventory Planning Basics

Before we look at inventory planning, let’s discuss a more basic term—inventory. It may refer to stored materials that serve a demand. The demand can be mainly of two types—current and impending.

An order (a requirement) can come from within the organisation or external customers who may reside anywhere across the globe.

Offline eCommerce retailers stock finished or processed commodities to sell directly to customers. Production and manufacturing companies store raw materials or intermediate supplies to weave into new goods. 

Inventory Process Flow

While the basics of an inventory process flow remain the same for most businesses and industries, you may find a few variations in some cases when it comes to supply chain visibility. Here, we will discuss the inventory process flow or lifecycle steps that apply to retail companies.


It all begins with buying the materials based on inventory estimates and requirements. The degree of inventory purchases may vary from business to business. Companies may purchase stocks below the required estimates, they can keep their items to optimum levels, or some companies may even go for excess inventory. 


You should keep materials in a clean, protected, and climate-controlled (for temperature-sensitive products) area. You will incur holding expenses to cover space, electricity, maintenance, etc. Brands can also rely on dedicated warehouse facilities to keep their stocks on a pay-as-you-use basis.

Make use of the inventory or sale

Now that inventory purchases and holdings are over, you may use your stocks to perform sales.


Keeping a real-time track of your stocks is vital to combating production flow challenges, achieving speedy deliveries, maintaining cash flow and ensuring customer satisfaction. You can learn what and when to order by examining the remaining stock/inventory closely.


You can reorder materials to keep your inventory at ideal levels to serve your customers flawlessly.


You can carry out a data-driven analysis and estimation to know how often you need to order items, envision future trends, and maintain optimal inventory throughout the year. Additionally, the derived data can help you use your resources.

What is Inventory Planning?

Inventory planning specifies the optimal quantity of stock availability to align it with sales capacity. It helps businesses forecast demand and determine precisely how much inventory and when to order.

Inventory planning is integral to your business’ supply chain strategy, order fulfillment, warehouse operations, and customer satisfaction. It helps you ensure the right amount of stock at the right time, reduce the overall cost of holding goods and optimize inventory.

In a 2020 Statista survey, approximately one-fifth of the businesses divulged that they plan to have more inventory in the aftermath COVID-19 pandemic. Also, the survey revealed that 27% of people would keep inventory levels the same but adjust the supply chain network.

Benefits of Inventory Planning

Benefits of Inventory Planning

Inventory planning is critical for successfully running an e-commerce business or an online store. In most cases, stores needing proper inventory planning are inclined to oversell, understock, and face issues vis-à-vis order fulfillment. This significantly delays the order delivery and affects the customer experience.

Here are some of the advantages of planning:

Reduced Overselling

First things first! Let’s briefly discuss overselling. It refers to selling more items than a retail store has on hand. It hampers the customer experience to a great extent. Here’s an example from your day-to-day business—your eCommerce website can show a product as available to your customers when it isn’t, forcing you to cancel the order after the customer purchases it.

Enriched Customer Experience

A pleasant customer experience is an essential component for the growth of all e-commerce brands. According to a Trustpilot 2021 report, 88% of consumers check a review site before purchasing items. You can enhance your customer satisfaction graph to a great extent by planning your inventory. 

The eCommerce Boom

As per the India Brand Equity Foundation (IBEF) report, eCommerce in India will reach US$ 99 billion by 2024, growing at a 27% CAGR over 2019-24 and is anticipated to reach US$ 350 billion by 2030.

These projections are impressive and promise an excellent future for internet retailers nationwide. You will need to scale up your inventories and streamline your inventory planning process to leverage this eCommerce boom.

Cash Flow

Your inventory carrying cost (or holding cost) comprises all your business expenses for holding and storing unsold stocks. It can be very costly for most retail business outlets (online and otherwise both).

Generally, a business’ inventory carrying costs are roughly 20% to 30% of its total inventory value. Therefore, with inventory planning, you can judiciously eliminate slow-moving and stagnated goods and invest in high-selling materials. 

Demand Forecasting

It helps you make informed and data-driven fulfillment conclusions and assess the total sales and revenue for a future period. 

In a nutshell, inventory planning helps you:

  • Reduce stockout events
  • Assess overstocks
  • Optimize inventory 
  • Quickly locate items in the warehouse
  • Control order delays
  • Offer discounts on slow-moving and perishable items
  • Increase cash flow 
  • Boost profitability
  • Combat theft and abuse
  • Eliminate redundancies

Challenges in Inventory Planning 

Inventory planning can pose multiple challenges for many retailers, including small businesses. It gets even more complex for enterprises running multiple channels with various stockrooms. Especially when demand surges during festive seasons or special occasions, things could get tricky. 

Here are some of the factors that potentially complicate the planning process:

Fragmented Data

Reliable, organised, real-time data is key to securing a smooth and well-oiled supply chain process.

You will need stocks, sales, and other historical facts and figures to devise a robust inventory strategy, but this data usually resides in multiple devices or channels. It can be difficult to retrieve all these details from various systems and map them together for a better-informed approach.

Limited Automation

Successful online stores rely heavily on inventory automation to automate warehouse tasks for automatic tracking and reordering.

Manual inventory management approaches are often time-consuming and vulnerable to human errors. Therefore, deploying automated software for efficient inventory management is only apt.

Untrained Staff

In the times we are living in, your staffs play a significant role in many warehouse operations. Technology is important, but software alone may not be enough for your warehouse processes. You need an adequately-trained team for satisfactory results.

Top Inventory Planning Software Providers

  • Shiprocket
  • Brightpearl
  • NetSuite
  • SAP
  • Blue Yonder

How Pickrr Can Help You Overcome Inventory Hassles

Pickrr has a comprehensive network of fulfillment centres across India. You can make the best use of Pickrr’s warehouse to avoid various expenses and procedural hiccups you may encounter setting up modern holding facilities.


Now that you have a fair understanding of inventory planning, you can develop an effective stock plan to optimise your inventory and meet consumer demands with operational efficiency. This way, not only can you scale your business, but you can also enhance customer satisfaction and profitability.

Frequently Asked Questions

Q1. Why is inventory important?

Inventory is the backbone of an eCommerce business. The absence of inventory can have detrimental effects.

Q2. What are the four types of inventory management?

Here are the four types of inventory management:

  1. Just-in-time management (JIT)
  2. Materials requirement planning (MRP)
  3. Economic order quantity (EOQ)
  4. Days sales of inventory (DSI).

Q3. What are the five benefits of inventory management?

Here are the five benefits of inventory management.

  1. Increased accuracy
  2. Cost reduction
  3. Reduced delivery deadlines
  4. Demand forecasting
  5. Enhanced customer satisfaction

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