Supply chain and inventory planning :

Supply chain inventory refers to the finished goods, raw materials and components such as
packaging and accessories held by suppliers, manufacturing facilities and distribution
centers throughout the supply chain process.
These organizations strive to maintain the optimal amount of inventory on hand to support
customer demand and ensure availability of products when needed.
Despite uncontrollable variables they sometimes face. Supply chain planning involves the
management and optimization of this inventory.
So, planning helps organizations ensure the right products are available at the right time
and in the right quantity throughout the supply chain network.
And keep this in mind all these companies want to minimize their costs while maximizing
operational efficiency. And planning, helps achieve these goals too. As you can imagine,
inventory planning is crucial.

First, accurate inventory planning ensures that products are available to meet customer
demand right when they need it.
It helps prevent backorders, delays and out of stock situations referred to as stockouts.
By meeting customer demand, organizations also help increase customer satisfaction and
loyalty.
And in some cases, an organization might face penalties determined by the customer if their
service falls below an expected and agreed upon value

thereby avoiding situations where the demand for a product exceeds its supply. Backorders
occur when an item is out of stock and cannot be immediately fulfilled, leading to delays in
delivery. By preventing backorders, a company can maintain customer satisfaction by
meeting their demand promptly and reliably.

For instance, customer ABC expects their orders to be complete 97% of the time and that at
least 80% of these orders arrive on time, think about it.
There are some significant costs associated with having excess inventory, such as storage,
obsolescence and cost for holding this inventory.
These costs include lost sales because customers might go to other companies or postpone
their purchases, which means the organization loses out on revenue.
It also affects customer satisfaction because stock outs can make customers frustrated and
disappointed.
Plus, we might face penalties because we couldn't meet order deadlines, to restock quickly
we might have to make rush orders, which means spending more money

And let's not forget that stock outs could force us to use faster and more expensive shipping
methods, so, effective inventory planning can help minimize all these costs.

Another reason inventory planning is important is because it can help optimize working
capital.
Excess inventory ties up valuable financial resources, and inadequate inventory can hinder
operations.
So it's important to understand the perfect balance between serving customers and having
too much product on hand to free up capital for other investments.
Inventory planning aims to achieve optimal inventory levels. One more reason for effective
inventory planning is to streamline operations.
Planning helps ensure a steady flow of materials through the supply chain, minimizes
production disruptions, and supports timely order fulfillment.
In turn, this improves customer service and satisfaction by ensuring products are readily
available.

Let's look at two fictitious companies and how they manage inventory and
planning. Techietime Gadgets is a global provider of handheld gaming devices and smart
home products.
They employ a sophisticated inventory management system to help meet
customer demand.
They maintain a strategic inventory buffer at various distribution centers to ensure quick
order fulfillment, and they plan production schedules to optimize stock levels, reduce stock
outs, and minimize excess inventory.
Their supply chain leverages advanced technology.

Harmony Furnishings produces beautiful custom handcrafted furniture designs for a limited
number of customers.
By collaborating closely with customers, they initiate production only after receiving
confirmed orders, thereby reducing the need for excess inventory.
Their inventory management focuses on sourcing and stocking raw materials efficiently to
meet demand while minimizing waste.
With a personalized planning process, Harmony Furnishings optimizes production timelines,
ensuring that each handcrafted piece is delivered to customers within agreed upon lead
times.
These two companies showcase distinct inventory and planning approaches based on
their product characteristics, market reach and customer demands. So what does inventory
planning mean to you as a supply chain analyst?
Well, you are a vital part of the process.
In your role, you will leverage lots of data, statistical models and other tools to analyze
historical sales data, market trends and more to accurately forecast demand.
You'll also collaborate with other teams to understand market dynamics, identify key drivers
that impact inventory, and use your business acumen to bring all of it together.
This contributes to effective decision making in inventory management.
What data do you look at for inventory planning?
You'll consider lead time, which refers to the time taken from placing an order to receiving
the inventory, demand variability, which refers to the fluctuation in customer demand over
time,
customer service levels and costs, to name a few.
You'll also assess inventory performance metrics, monitor stock levels, and analyze demand
patterns to identify areas for improvement that may need more attention due to their
potential risks.
Then you'll use your keen analytical skills and stellar business acumen to help develop
inventory management strategies and inventory policy for that specific segment, customer
and time of the year.
As a data analyst, you'll also work closely with many other stakeholders throughout the
supply chain, such as customers and suppliers, to ensure alignment of inventory planning
activities.
You're in insights and recommendations here will affect inventory levels, forecast accuracy,
stock outs and performance throughout the supply chain.
By implementing inventory planning in your role as a supply chain analyst, you'll help the
organization work toward achieving the KPIs and the operational excellence that drives
efficiency and supports profits.
Sounds exciting, you'll have quite an impact, that's for sure.