Did you know most merchants have up to 80% of their cash tied up in inventory?
In fact, for every dollar the average US retailer makes, they have $1.35 stored in stock – which makes inventory the biggest asset for most brands.
With so much cash locked up in it, it makes sense to plan your inventory properly.
That means accurately forecasting your sales demand so you can order the right amount of inventory at the right time, for the right location, while eliminating overstock and avoiding running out of stock.
While planning your inventory is always a smart move, right now it’s something you can’t afford not to do.
Why is inventory planning essential in 2023?
- Supply is unreliable. Global shortages, surging e-commerce demand and the pandemic caused supply chains to crumble – and issues are still ongoing. Uncertain supply puts you at risk of winding up with excess stock at the wrong time (like MADE.com fatally did in 2022) or running out of stock, which are both lethal for cash flow
- Demand is unpredictable. Influencer culture and the ever-evolving shopping habits of modern consumers, especially during a cost of living crisis, make guesstimating your inventory requirements more risky than ever. Accurate forecasting that takes seasonality, promotions and random demand spikes into account is essential – this is no time for guesswork.
- Cash flow is everything. Up to 80% of a merchant’s cash is tied up in inventory, and right now rising costs and economic uncertainty are putting increased pressure on the remaining 20%. It’s critical to avoid excess stock and stockouts, which are both cash flow killers.
Typically, there are two ways to plan your inventory: using a custom, manual solution like a spreadsheet or using dedicated inventory planning software like Inventory Planner. But which is better?
Spreadsheets: friend or foe?
Spreadsheets are increasingly considered to be a clunky, outdated option for planning inventory that are prone to errors (and about as reliable as a chocolate teapot).
However, tons of companies – large and small – have traditionally used spreadsheets to forecast demand and work out how much inventory to order. One of the reasons for that is that spreadsheets can be considered low cost.
Planning your inventory in Excel or Google Sheets is technically cheap (as long as you don’t count the human resource required to input and interpret the data). This makes it a popular entry-level way for start-ups and smaller brands to plan their inventory.
Another attractive feature of spreadsheets is that they offer an easy way to store your data – although data sync and updates have to be done manually and frequently, which isn’t ideal for growing brands.
In Excel, it’s possible to set up a variety of formulas that turn your sales data into forecasts – although a certain amount of spreadsheet wizardry is required to understand and implement these effectively and it remains limited in terms of scope. For instance, if you can spot a clear linear trend in your data, the forecast.linear() function allows you to calculate a value by drawing upon your known_x values and known_y values.
Other more advanced forecasting functions require a combination of existing values and the triple exponential smoothing method – it can be complex and time-consuming, yet still not particularly reliable or intuitive.
How does Inventory Planner compare?
Inventory Planner is a top-rated e-commerce inventory forecasting and purchasing tool. It tells you what to buy and when to buy it so you can meet demand and your sales goals, while staying ahead of trends and eliminating cash flow killers like excess stock.
One of the major reasons merchants switch to Inventory Planner from using spreadsheets is because it’s an easy way to automate inventory forecasting and get hassle-free buying recommendations.
Unlike with spreadsheets, the legwork of creating forecasts is done for you, based on your historical sales data, factoring in promotions and seasonality for optimum accuracy, and combined with your supply lead time and your desired stock cover periods. No formulas or data entry required!
In the rapidly evolving, increasingly unpredictable environment we’re now in, that just won’t cut it anymore. Intelligent real-time inventory planning and automated, integrated demand forecasting software is essential.
Critically in the current landscape, Inventory Planner is used as an alternative to spreadsheets because it’s proven to eliminate stockouts and excess stock by enabling merchants to only invest in the inventory customers want to buy. This supports a healthier cash flow and boosts customer experience.
Want to know more? Book a free customized demo now
Top 5 problems with using Excel to forecast demand
1. Tedious + time consuming
Short of a few forecasting formulas, spreadsheet-based forecasting is almost completely manual – data has to be manually synced or even entered cell-by-cell and a dedicated person is usually required to spend all of their time trying to interpret the values the spreadsheet produces.
It’s soul-destroying and it takes up time that could be better spent on other things. It also means that while the subscription fee linked to using spreadsheets is low, the labor cost actually makes it an expensive option, as body armor brand Atomic Defense experienced.
The brand’s Operations Manager Dylan Vasquez says: “We were relying on a combination of spreadsheets and guesswork. It took hours every week and it wasn’t even accurate.
“It meant we were frequently running out of stock. We just couldn’t seem to forecast accurately.
“Since switching to Inventory Planner, we’ve gone from using spreadsheets and hoping for the best to having complete confidence in the accuracy of our forecasts. Our customers are much happier!”
2. Highly error-prone
Excel requires up-to-date and accurate records to produce forecasts, but only the process of generating inventory forecasting is automated. This leaves a lot of room for error – even the most experienced data entry operators are prone to mistakes.
Add to that, once you scale your business, increasing your SKUs and dealing with large transactions, you’re more likely to make clerical and typographical errors. Excel forecasts can be misinterpreted if you lack the necessary expertise.
Healthcare brand Anatomical Worldwide was spending 12 hours a month in spreadsheets, yet still struggling to get its stock levels right.
Doug Welch, the brand’s Supply Chain Director, says: “We had several people working on purchasing in Excel. Each person had their own methods for forecasting – and this resulted in lots of stockouts and overstock.
“It was a tedious manual task, and very prone to error. Then we switched to Inventory Planner and inventory planning has become a simple, intuitive process that I actually enjoy. Best of all, it has produced great results for the business and saved us countless hours.”
3. Not scalable
Excel may be a stop-gap solution for small or new businesses, but it becomes more of a hindrance than a help when a brand grows. That’s because it gets slowed down by large volumes of data and staying across hundreds or thousands of SKUs on one sheet becomes too challenging, which is exactly what sports brand Cycology experienced.
Founder and CEO, Michael Tomchin, says: “I was spending hours poring over data from multiple sources and trying to massage it into spreadsheets to come up with a solution that worked.
“The trouble was, we’ve got about 2,000 SKUs in every warehouse for every product, so trying to work out the specifics of what we needed was absolutely daunting. It resulted in huge overheads and multiple bad decisions.
“Our Inventory Planner subscription is one of the best investments we’ve made and it gives us a huge productivity boost.”
4. Quickly out-of-date
Google and Excel spreadsheets need to have data uploaded or manually entered in order to do accurate calculations. But almost as soon as new data is added, it becomes out of date.
Shopping trends can literally change overnight – an influencer can spark a sudden surge in demand for a particular item or a product can quickly fall out of favor.
Spreadsheets can’t keep up to speed with the rapidly-evolving retail landscape – a solution that automatically adds new data is needed.
5. Can’t be trusted
In order to invest with confidence in new inventory, reliable forecasting is needed – but spreadsheets can’t offer that because a large amount of interpretation and guesswork is involved.
Spreadsheet forecasting isn’t definitive; often two people within the same team read the forecast of a spreadsheet differently. It simply can’t be trusted, as sports brand Driveline Baseball learned the hard way.
Emily Coolbaugh, the brand’s Chief of Staff, says: “Before Inventory Planner, we’d just be taking a stab in the dark when placing orders.
“Now we can ask ‘hey, exactly what are we gonna need for the next 45 days?’ and Inventory Planner tells us down to the last unit what we need to order, factoring in our supplier lead times.
“It’s a genuinely game-changing tool – especially in the current market. It’s great to be able to go to the CEO with an exact report of our inventory – and it’s not in a random Google sheet that only one person understands.”
Top 6 advantages to using Inventory Planner
1. Proven time-saver
Inventory Planner is more than just a forecasting app; it’s a business intelligence tool that has saved brands across the globe heaps of time. Rather than wading through spreadsheets and getting confused, merchants get instant SKU-specific performance snapshots available at a click of a button.
The time savings have been one of the biggest perks for trueCABLE. John Ibbetson, the brand’s VP Sales and Business Development, says: “Inventory Planner has been a phenomenal time saver, and integrating it alongside the rest of our operational processes has completely transformed how we function as a business.
“Our spreadsheets are long gone – as are the hour-long chats we’d have guessing which of our products we should purchase next.”
2. Next-level accuracy
Inventory Planner accurately predicts demand for all your products, including seasonal, non-seasonal, fast-selling, slow-moving, retail and wholesale products.
Unlike spreadsheets, it factors in seasonality, promotions, market shifts and your own sales trends to provide forecasting and buying recommendations you can trust.
3. Real-time insights
With access to accurate, real-time data, merchants can make more informed and faster decisions about how much to purchase and when.
Because it factors in seasonality, marketing activities and abnormal sales spikes or dips, Inventory Planner gives merchants the flexibility needed to handle and react to rapid market shifts.
The always up-to-date insights across variant performance, including sizes and colors, also intelligently informs product development and market expansion.
4. Alerts and notifications
In the ever-evolving retail landscape, there’s no time to dither. Merchants need the ability to easily spot trends or opportunities and take quick action – and Inventory Planner gives it to them.
It flags the costs of each overstocked item, so you can easily see which items to liquidate first. Alerts can also be issued for slow-moving or hot-selling products so merchants can quickly action discounts or promotions.
5. Customizable + flexible
Unlike in spreadsheets, Inventory Planner offers a highly customizable selection of filters and settings to suit your business needs.
It provides non-stop calculations of your inventory requirements and translates them into simple, intuitive buying recommendations – with the level of detail you want, from SKUs to warehouses.
It’s the customizable insights which have proved invaluable to fashion brand Vicki Vi. Danielle Malconian, the brand’s CEO, says: “Inventory Planner has allowed me to grow the business.
“Before, it was just me, sitting down with my excel sheets trying to figure out how much to buy. Now we trust Inventory Planner implicitly to predict demand. The numbers are always right.”
6. Maximizes profit
By helping businesses eliminate overstock and stop running out of stock, Inventory Planner offers optimized cash flow with protection against missed sales opportunities and boosted sales potential.
Inventory Planner’s forecasts make it simple for merchants to buy the most in-demand, high margin products to meet demand and take advantage of trends. This makes it a proven tool for helping brands maximize profit – even during economically challenging times.
Spreadsheets vs Inventory Planner
Ready to ditch the spreadsheets yet? Book your free Inventory Planner demo now.