Inventory sheets are valuable tools that allow small businesses to track inventory and make a plan for purchasing stock. While they can be sufficient for retailers with limited products, companies looking to scale may find that manually entering data on inventory sheets is insufficient when trying to keep up with fast-paced markets. That’s where inventory planning software can help. Here, you’ll learn about how inventory sheets work, their advantages and limitations as inventory management tools, and how more sophisticated software solutions can help your business grow.
The importance of inventory planning
Inventory is an essential business asset in retail and e-commerce. But while it is obviously necessary to make sales, inventory can become problematic if it isn’t managed properly. Customer demand can fluctuate, supply chains can be unpredictable, and storage costs can add up quickly.
Before inventory is sold and becomes revenue, it is often the largest asset of an e-commerce merchant, which means it can turn into a significant financial burden if not managed properly. Operational and storage costs, overstocking or understocking, and low turnover can make inventory a drain on cash and resources and slow down operations. With so many other factors impacting cash flow and profit, such as marketing and new customer acquisition costs, utility bills, and increased shipping charges, it’s critical that merchants get the most out of their most expensive asset—inventory.
In order to maintain solid profits and growth and make future-proof decisions in a rapidly-evolving market, merchants must have an accurate, up-to-date view of their product performance. And proper inventory planning will ensure that you always have the right amount of inventory to meet customer demand without tying up too much cash in excess quantities of stock.
What are inventory sheets?
Simply put, inventory sheets are spreadsheets businesses create to track, record, and report information about what they make, buy, and sell through their stores, whether online or offline. They can help small businesses keep track of a variety of product and sales information, including names, descriptions, SKU numbers, barcodes, costs per unit, quantity in stock, sales prices, suppliers, sold prices, sold units, revenue, on-purchase stock, and more, depending on the business’s needs. Furthermore, the tracked sales and inventory supply data can be used to forecast future customer demand and plan inventory ordering accordingly.
Advantages of inventory sheets
There are a variety of documents, spreadsheets, and inventory templates, such as Excel and Google Sheets, that are easy to use, straightforward, and affordable. There are even a few free, printable sheets that can be used for inventory control. These templates help retail and e-commerce businesses optimize inventory management, intuitively store data, and measure important KPIs like inventory turnover, sales, lead times, stock levels, and warehousing costs. Inventory templates are the first step toward efficient inventory planning for small businesses and a valuable tool for tracking, reporting, and managing inventory levels.
However, as markets are evolving faster than ever, it is increasingly important to remain agile. Businesses must be able to accommodate rapid shifts in sales forecasting and inventory planning to maintain accuracy, as yesterday’s best-seller may be tomorrow’s cash drain. If you’re using outdated data, you won’t be able to keep up with the trends and make smart decisions.
Limitations of inventory sheets
While inventory sheets and templates are great tools for small businesses, they’re not efficient enough to stay up-to-date with accurate information. If your business has limited stock items, SKUs, and locations, inventory sheets may be enough to keep track of your needs. But if you’re looking to scale and grow your organization, you may find that inventory sheets have a variety of drawbacks that can limit their effectiveness, including:
- They require manual updates. Because all the information in an inventory sheet is entered manually, it doesn’t get updated in real-time. Market trends change quickly, and any lag time between updates may result in making crucial inventory decisions using information that is already outdated.
- They’re not ideal for multichannel selling + multiple inventory locations. Multichannel selling extends customer reach and reduces the risk of putting all your eggs in one basket. Using multiple inventory locations and modes, such as warehouses, 3PL suppliers, and dropshippers can help optimize logistics costs and efficiency. For example, a multichannel clothing brand may have an e-commerce site on Shopify and sell its products on Amazon. The brand might use its own warehouse to fulfill Shopify orders and Amazon FBA for Amazon orders. Goods will sell at different paces on the two channels, so the inventory needs will also differ. If the business relies on manual data entry on sheets, it can be difficult to ensure data is synced across sales channels and inventory locations. This can result in discrepancies, overselling, forecasting issues, and other problems.
- They’re prone to human error. When starting with a blank inventory template, everything must be done manually, which leaves a lot of potential for human error. Keying in the wrong number, selecting the wrong cell, or missing a digit on a formula can lead to significant and easily unnoticed errors that are inevitably time-consuming to correct later.
- They can’t perform complex calculations. Not all products are created equally, and they may require different models for forecasting sales. For example, if you have different product types that sell at different paces, like seasonal and non-seasonal items, you’ll need to build a dedicated model for each to remain accurate. The math can get complicated very quickly. As your business grows and becomes more complex, more comprehensive software is needed to manage inventory, analyze trends, and interpret customer behavior.
- They have limited collaboration capabilities. Efficient inventory planning requires everyone to be on the same page. While inventory sheets are still effective tools for demand planners, buying specialists, and operations managers to refine their strategies, a scalable inventory system requires the ability to distribute and collaborate accurate metrics in real-time across an organization. Inventory sheets are not easily transmissible, requiring each employee contributing data to learn how the inventory sheets are built and how to update data properly.
The solution: inventory planning software
The best solution to the limitations posed by inventory templates and sheets is a capable inventory planning software. With automated inventory planning software, you can eliminate time-consuming human errors and manual calculations, refine your demand forecasting and inventory planning models, gain up-to-date insight into sales trends and product performance, and communicate information effectively across your organization. The advantages of inventory planning software include the following:
- It’s always up-to-date and accurate. Inventory planning software monitors your sales orders and inventory information, instantly updating its predictions of future customer demand when new sales patterns occur and offering inventory purchasing recommendations accordingly. This allows you to make informed purchasing decisions with confidence, even in the most turbulent marketplace.
- It performs complex calculations. Inventory planning software analyzes a variety of different metrics to provide comprehensive recommendations. Calculations utilizing periodic sales trends comparisons, seasonality, product promotions, current stock levels, existing purchase orders, supplier lead times, and intelligent sales predictions are made automatically, so you know exactly what to order and when. Plus, all the calculations can be done at the SKU level, so you can avoid overstocking certain SKUs and understocking others, which is impossible using manual calculations on an extensive catalog.
- It provides in-depth inventory visibility. To make the right decisions about your inventory, you need a comprehensive, updated view of all your products, from SKUs and item types to warehouses and suppliers. With Inventory Planner, you can run reports based on SKU, product category, product brand, warehouse location, vendor, or even your custom categories to gain insights that really matter to your business. Plus, it provides 200+ meaningful metrics that help you make informed decisions faster. For instance, you can look at “overstocked costs” to identify your top cash-drainers and liquidate them before they lose their appeal. Or check out “forecasted lost revenue” to identify products that will be running out of stock soon so you can quickly replenish them and avoid lost sales.
- It customizes forecasting models. Not all products sell at the same pace, so you need different forecasting models for different products. Inventory planning software allows you to create customized forecasting models to accommodate seasonal, non-seasonal, retail, wholesale, and other product types to ensure accuracy.
- It makes multichannel + multiple warehouse inventory planning easy. The more channels and inventory locations you have, the more complex inventory planning can be, especially if you’re entering data manually. So it’s critical to choose an inventory planning software that offers multi-channel and multi-warehouse inventory planning functionality. Inventory Planner does just that–it automatically forecasts demand for each of your warehouses, and sales channels and offers inventory buying recommendations accordingly.
- It streamlines purchasing processes. Predicting how much product you’ll sell and knowing when and how much inventory to order is crucial, but they’re just the first steps in the purchasing process. You’ll also need to place purchase orders, receive new merchandise, and update all your channels and systems, which can be tedious and error-prone if done manually. Inventory planning software can automate your purchase order creation and seamlessly integrate with your inventory management systems and sales channels to keep your inventory levels synced.
- It takes the guesswork out of inventory planning for new products. Many e-commerce businesses, like fast-fashion brands, launch new products frequently to keep up with ever-evolving customer behavior and taste. However, with no historical sales data, determining how much inventory is needed for a new product can be challenging. Luckily, some inventory planning software offers a clever way to forecast sales and plan inventory levels for new products. Inventory Planner lets you “borrow” sales data from similar item categories and use it to predict demand for new products. It can also translate the data into variant-level inventory purchasing recommendations, so you’ll know when and how much inventory to order for each variant, like color, size, cut, etc.
Buy high-in-demand products at the right time, fast
With reliable buying recommendations and automated PO creation
One of the fundamental steps to proper inventory planning is knowing how much you will likely sell, but figuring out the answer involves gathering and incorporating a wide variety of real-time data all at once, which is particularly tricky in a turbulent marketplace Inventory sheets can be valuable tools for small businesses to keep track of essential inventory and sales information and build basic sales forecasting and inventory planning models. But if you want automated updates, accurate forecasting, streamlined purchasing, in-depth reporting, and a scalable inventory solution that will grow with your retail or e-commerce organization, you need to upgrade to an inventory planning software like Inventory Planner.