Inventory Planning

Inventory Planning

Inventory planning is the process of determining how much stock to hold, where to hold it, and when to replenish it—so that customer demand is met at the lowest possible cost.

It sits at the center of supply chain management, balancing service levels (product availability) with cost efficiency (avoiding excess inventory, carrying costs, and waste).

SCT Advisory supports these critical elements of inventory planning:

• Inventory Segmentation – Classifying SKUs by importance, variability, or profitability to apply differentiated inventory policies.
• Inventory Optimization – Establishing safety stock levels given demand projections and variability, and optimizing stock across the entire network (suppliers, plants, warehouses, distributors, retailers).
• Replenishment Planning – Deciding when and how much to reorder (using models like EOQ, reorder point, or dynamic policies).
• Lifecycle Management – planning for new product introductions, phase-outs, and slow movers.

With SCT Advisory’s guidance, inventory management projects—whether through better processes, analytics, or advanced systems—can deliver very strong ROI because inventory ties up so much working capital and directly affects both cost and service.

SCT observes the following ROI opportunities from inventory planning initiatives:

• Working Capital Reduction (10–30%)
  • Optimized inventory policies lower overall stock levels while maintaining service.
  • Frees up cash tied in slow-moving or excess stock. Example: A global electronics firm reduced inventory by $150M after implementing multi-echelon optimization.
• Waste & Obsolescence Reduction (15–25%)
  • Especially critical in industries with short lifecycles (fashion, electronics, food).
  • Right-sizing inventory prevents markdowns, scrap, and write-offs.
• Logistics & Storage Savings (5–15%)
  • Less excess stock reduces warehouse space, handling, and insurance costs.
  • Better positioning of stock reduces unnecessary transfers and last-minute shipments.
• Service Level Improvement (2–10% increase in OTIF / fill rates)
  • Fewer stockouts mean higher customer satisfaction and sales.
  • Avoids retailer penalties for missed service-level agreements.
• Better Production & Procurement Alignment (5–15% savings)
  • Smoother inventory flow reduces emergency orders, overtime, and expedited freight.
  • Suppliers can plan more efficiently, lowering costs.
• Productivity & Planning Efficiency (20–40% improvement)
  • Automation reduces manual spreadsheet work.
  • Planners can spend more time on exceptions and strategic decisions.

 Overall ROI:
Most companies achieve 2–8x ROI within 12–24 months of an inventory management project.

• Quick wins often come from eliminating excess stock and improving visibility.
• Longer-term gains come from advanced tools like inventory optimization and AI/ML demand-supply balancing.