Accurate demand planning will keep your customers happy. Netstock experts share top insights to consider when planning inventory in 2022!
It takes a collaborative team, accurate data, and the right inventory processes and software to keep your customers consistently happy. Accurate demand planning will help predict future demand and provide a vital balance of ensuring you have the right stock available to deliver to your customers while reducing the risks incurred from holding excess stock.
With volatile supply and unpredictable demand – Netstock experts share top insights to improve demand planning in 2022.
Keep agile! This year, supply chain disruptions will continue, making it incredibly difficult to plan inventory replenishment. Lead times will be very long, and supply will be extremely unreliable. You could perhaps plan around long lead times if suppliers could guarantee the stock would arrive on time. But, with no certainty, communication up and down the supply chain will be more critical this year. Keep your communication lines open, and adjust your planning accordingly – Barry Kukkuk, Founder, Netstock
A good demand plan will help predict the future sales your business can expect to earn, improve forecasting, and effectively plan for new product launches and campaigns, taking into account seasonality and other anomalies to ensure your supply chain is meeting demand.
#1 Plan for extended lead times.
Supplier lead time will remain the number one challenge this year. With the goal of servicing customers being front of mind, it can be tempting to order surplus stock when suppliers extend their lead time. Excess stock can steer your inventory holding into risky waters with capital potentially tied up in stock collecting dust in your warehouse.
In Europe, many UK-based companies are opening up warehouses here to avoid logistic bottlenecks caused by BREXIT and global supply chain issues. This means suppliers are increasing their prices which will dramatically affect demand planning now and into the future – Jorg Salomo, Country Manager Germany, Netstock.
Measure your supplier’s performance and, more importantly, the supply of key stock items that contribute the most to meet demand and, ultimately, your sales. Keep communicating with your suppliers, build trust and encourage data sharing.
Sharing your demand forecast with your supplier will:
- Know which items you are predicting you’ll need.
- Be more reactive and plan accordingly to ensure they can meet your projections.
- Have a holistic view of the projected sales they stand to make. [this can open up the conversation to negotiating better T&Cs with your supplier]
Distributors and manufacturers need the right tools to automatically measure and monitor supplier delivery performance at the item and supplier level. Supply of finished goods, packaging, and raw materials are often imported with long lead times, exacerbating the risk of late or under delivery. Automatically highlighting items exhibiting risky or erratic supply should then directly tune the safety stock to respond to poor supply. In this way, you can identify unreliable suppliers and find alternative sources of supply to ensure uninterrupted supply – Andy Hiscox, Founder and CEO Australia, Netstock.
#2 Safety stock to help decrease risk.
Safety stock is your insurance policy to reduce the impact of experiencing stock-outs and ensuring your customer is happy. Given current supply chain disruptions, planning to have enough safety stock of your most profitable items is vital as not every item will require high safety stock levels.
It is now more critical than ever to gain in-depth insight into the inventory needed to achieve company goals. The increases in inflation rates across the globe create a financial incentive for companies to focus on inventory optimization. With the value of cash being eroded and the cost of some physical goods rising rapidly, companies will want to carry more safety stock than under normal circumstances – Paul Allerhand, Netstock CFO.
Understand the risk factor of each key stock item to determine the right safety stock level you need.
The Netstock app can measure the increased risk of product shortages and can identify where action is required, in addition to the calculated increases in safety stock. The app can help demand planners rationalize product offerings by identifying top inventory items and ordering the products that make up the bulk of sales and revenue. That way, the supply chain is not taxed with ordering products that offer little value, freeing up time and capacity to order more valuable items – Rian Human, VP of Customer Success, Netstock.
Make sure your safety stock calculator is dynamic, review your calculations, and adjust for any changes in your forecast. This allows you to be agile and responsive to changes that can affect meeting demand.
Some customers face extraordinary delays in receiving stock, so having a reliable forecast and dynamic safety stock calculation to help mitigate this risk has also been more important than ever – Gail Haggerty, Director of Onboarding, Netstock.
#3 Work with accurate data.
Data has infinite value if accurate, accessible, understood, and used to make actionable insights. Accurate data will give you visibility of your inventory holding and historical sales data to confidently forecast demand. The lack of accurate data has significantly hindered businesses, contributing to poor decision-making and lost sales.
Accurate data helps you focus and monitor:
- Key inventory indicators to ensure you meet your expected fill rate targets
- Items that may run into stock-outs
- Open purchase orders flagging items that are potentially overstocked
- How well your suppliers are performing
These inputs help determine how well you can service your customers.
Create an ongoing maintenance routine to ensure the information used in your software is accurate. No process or software improvement will help enhance your demand planning if the data is wrong – Gail Haggerty, Director Onboarding at Netstock.
#4 Update your IT security policies.
Cyberattacks will continue to disrupt supply chains in 2022. The number of cyberattacks globally will increase in both volume and sophistication. Manufacturers, suppliers, and retailers who become victims of an attack will experience challenges meeting demand, as they may experience stock-outs resulting from delays in acquiring raw materials, affecting production and the delivery of finished goods.
Diligent cybersecurity can serve as an enabler for the industry by improving stability, resilience, and lowering risks, therefore driving down potential costs that would otherwise arise from service disruptions, data breaches, ransomware, denial of service and supply chain attacks – Yolande Sowden, IT Security & Risk Manager, Netstock.
In 2022, more software companies will be creating a software bill of materials (SBOM) for their software. The new Biden administration now requires companies doing business with the US federal government to provide an SBOM. With ongoing supply chain attacks, whether you deal with the US government or not, this trend will reduce the time to identify software vulnerabilities and quickly resolve them.
#5 Align and connect with all departments in your business.
You can’t manage inventory in isolation! Regular communication across sales, marketing, finance, and operational teams is vital.
Regular communication will foster:
- Trust among teams
- Encourage information sharing of relevant market intel
- Collective responsiveness to tackle challenges
- A customer-centric mindset to planning
- Innovation amongst teams to improve processes
Another key input into demand planning is knowing what sales and marketing campaigns are planned. Being aware of unpredictable supply can impact how demand is driven through marketing and sales.
Demand planners and marketing teams can strategically decide how individual items will be marketed by working off historical sales forecasts and having current market intel. Why spend time and resources on products that you’re not sure you’ll be able to supply?
Marketing teams and demand planners need to work closely to plan ahead versus reacting to potential disruptions internally that may affect fill rates – Josh Werner, VP, Marketing, Netstock.
By providing information about future marketing campaigns and planning budgets ahead of time, demand planners will know which products and quantities to prepare for these campaigns.
#6 Use demand planning software.
Technology will give your supply chain a competitive edge! Taking on board the insights shared in this post, and having the right demand planning software will allow you to action each insight highlighted:
- accurate data
- visibility into your inventory holding
- automatically measuring suppliers
- automated forecasting
- calculating the right safety stock
Many inventory holding businesses are still managing their inventory on spreadsheets. Given how unstable supply and demand is and how complex supply chains have become, can your business financially survive without a demand planning solution? Do you know what your inventory holding will look like in the next 12-24 months? Are you able to forecast up to 24-months? Flex your forecast to know the impact of various scenarios you could experience. That is the power of technology.
Businesses may also be reluctant to invest in a tool for either financial reasons, fear of change, or not fully understanding the actual Return on Investment.
Netstock’s customer onboarding and training program is diverse and caters to users’ different styles and preferences. “I prefer learning a new tool by diving in and using it, whereas other members of our team preferred watching the videos and attending the webinars first. Having these different avenues of learning available contributes to the overall success of the onboarding process – Bethany Claps, Materials Manager at AAI.
Invest in a demand planning solution that can provide:
- A slick and thorough implementation process
- A world-class onboarding process designed by inventory experts
- Ongoing support from real humans for all your users
“Supply Chains are under enormous pressure like the world has never seen before. Our onboarding teams understand this. We can empathize and support our customers by sharing our knowledge and providing the right tools and strategies to gain the best outcomes in very difficult circumstances,” continues Gail.
The big take-aways for demand planning this year.
Businesses should reflect on how the last two years affected their inventory planning. What processes or inputs were not successful and what new processes will be adopted in their planning going forward – Ronald Laxton, MD South Africa, Netstock.
- There will be ongoing supply and demand challenges.
- With the right demand planning tool, you can plan more accurately for future demand.
- Data accuracy should always be front of mind and become part of best practices in the business.
- Over-communicate with your teams, your suppliers, and your customers.
- Ensure your IT and security policies are updated.