What is inventory planning? How should summer focused brands inventory plan for 2023 amidst a recession?

What is inventory planning?

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Starting with the basics, inventory planning is the process of determining how much inventory to keep on hand in a business at any given time. It’s an essential component of supply chain management because it helps to balance the trade-offs between having too little inventory (which can result in stock-outs and lost sales) and having too much inventory (which can tie up valuable resources and lead to excess carrying costs).

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What factors should I take into account?

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Starting with the basics, inventory planning is the process of determining how much inventory to keep on hand in a business at any given time. It’s an essential component of supply chain management because it helps to balance the trade-offs between having too little inventory (which can result in stock-outs and lost sales) and having too much inventory (which can tie up valuable resources and lead to excess carrying costs).

Sales forecasts, lead times, safety stock levels, and demand patterns are all factors that can influence inventory planning. Businesses can determine how much inventory they need to have on hand to meet customer demand while minimizing excess inventory by taking these factors into account.

There are several approaches to inventory planning, including the use of statistical models, such as the Economic Order Quantity (EOQ) model, which helps to determine the optimal inventory order size given a set of variables. Another approach is to use software tools and systems, such as enterprise resource planning (ERP) systems, to help automate the inventory planning process.

Effective inventory planning can assist businesses in lowering costs, increasing customer satisfaction, and increasing profits. It can also help to improve overall supply chain efficiency by ensuring that inventory is available when needed and lowering the risk of stock-outs.

For summer-focused brands, it's critical to have a solid inventory plan in place to ensure you have enough stock to meet seasonal demand. As you ramp up for important industry events like Outdoor Retailer, and start meeting buyers, you’ll need to consider how to fill their POs.

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Should my inventory planning change with talks of a recession?

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However, if you are anticipating a recession, you may be wondering if your inventory planning should be altered in any way. Here are a few pointers to think about:

1. Examine your sales data: Examine your sales data from previous recessions to see how your business fared during those times. This will give you an idea of what to expect in terms of product demand and will allow you to plan your inventory accordingly.
2. Think about your product mix: Consider the types of products that sell well during a recession. These could include low-cost items, useful products, or items that help people save money. Consider expanding your product line to include more of these items.
3. Be strategic with your inventory: It's critical to be mindful of your inventory levels during times of economic uncertainty. Don't overstock on items that are unlikely to sell, but make sure you have enough of the items that are likely to sell.
4. Look for cost-cutting opportunities: A recession can be a good time to reevaluate your business expenses and look for cost-cutting opportunities. Negotiating better terms with suppliers, streamlining your operations, or finding more cost-effective ways to market your products are all examples of this.
5. Stay adaptable: The key to surviving a recession is to be adaptable and flexible. Be prepared to change your business strategy if necessary, and be open to new opportunities.

Businesses can effectively increase efficiency, reduce costs, and improve profitability even in the midst of a recession by following these tips when carefully planning out inventory. While navigating economic uncertainty is never easy, it is possible to come out on top with careful planning and a little creativity. And, with a well-thought-out inventory plan, your company will be able to effectively manage inventory levels while meeting customer demand.

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Interested to see how Settle already helps hundreds of brands with inventory financing—schedule a demo today!

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