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5 Steps to Digitize Your Inventory Planning Process

Supply Chain Management
July 28, 2020

Many companies cite “inventory optimization” as a goal.  And with the digital tools available today, companies can manage their inventories better than ever with cutting edge inventory planning software such as that provided by DemandCaster.  These platforms empower companies to optimize their inventory with less effort while maintaining superior service levels. The software is agile, flexible and cloud-based, and offers powerful analytics that can drive change in inventory processes above and beyond “cost savings”.  And statistics show that most companies these days are undergoing a digital transformation. Cloud-based computing increased eightfold from 2015 to 2017 and is expected to double again by the end of 2021.

Benefits of Inventory Planning and Optimization Software

For companies looking to take advantage of Inventory planning and optimization software, there are many benefits that will not only reduce costs.  They also help develop and improve processes that impact areas outside of the warehouse, from inbound freight handling and logistics through manufacturing.  These benefits include:

  • Better Fill Rates – Because software has rapid demand sensing capability driven by machine learning algorithms, inventory can be looked at as dynamic rather than static and can lower inventory and holding costs.
  • Better Logistics Performance – Because this software utilizes data in near real-time, it  allows near real-time asset tracking to improve on-time delivery.
  • Enabling Robotics – As the data is unsiloed and available end-to-end, inventory planning software can be integrated into ERP systems and even into the robotics at the shop floor level, enabling process improvements, cost savings, and improved productivity within manufacturing.
  • Reduced Errors – As the system offers end-to-end automated workflow, the chance of human error in data input and analysis are significantly reduced.

Barriers to Digitization

Despite these benefits, there are still companies that find it difficult to make the leap to digitization.  This lag signals a disconnect among functional areas that degrades the overall performance of the supply chain, performance that could be enhanced by a digital transformation. A recent McKinsey study found that the average supply chain has a digitization level of 43 percent, the lowest of five business areas that were examined. A mere 2 percent of the surveyed executives said the supply chain is the focus of their digital strategies. McKinsey Barriers to digitization include:

  • Ineffective Master Data Management – With siloed data, legacy software and disparate connectivity across platforms, low data quality or contradictory data from different systems leads to uneven or incorrect decision-making.
  • Misaligned Goals –  Different functional areas may operate with undefined goals, or goals that don’t lead to success across the enterprise.  For example, purchasing and warehouse operations may focus only on cost savings, while other areas such as supplier performance measurement or freight logistics may have no formal process at all making it difficult to parse and understand data at a meta level.
  • Lack of Communication – Because modern supply chains are so long and complex, inventory planning is the sum of many parts along the entire chain.  If communication breaks down, is nonexistent or is limited to only emailed and faxed paper-based updates, collaboration suffers, further degrading the data quality.
  • Lack of Urgency – While many companies acknowledge the benefits of digital transformation and its impact on inventory planning and other areas, they may not be sure of where to start.  This may be due to issues with executive buy-in or it may simply relate the fact that the organization lacks the expertise to understand how to scale a digital initiative to take advantage of everything it can offer.

Steps for Digitizing Inventory Planning

With the tools available for inventory planning, there is no reason to delay digital transformation.  And because today’s software is intuitive and developed with ease of use in mind, technical assistance and deployment can be done without the need for a complex IT infrastructure or skill set level, allowing anyone to take advantage of the software’s benefits. Here are five steps to digitizing the inventory planning process that will help get you started:

  1. Develop a Digital Target – To understand where to start, develop a digital target that states where you would like to end up.  For example, a company wanting to improve inventory accuracy, reduce holding costs and improve fill rates may need to survey cross-functional areas such as purchasing, but also key areas such as forecasting and planning to develop a realistic digital target that pulls all relevant departments into the data stream
  2. Assess Business Needs – Once the digital target is established, assess your current business needs.  This helps determine the kind of software needed to hit the target and aligns the digital target with the business goals.  For example, inventory planning software can be used on its own as well as integrated into an existing ERP as part of a broader digital conversion at the enterprise level.  The assessment should include development of an inventory plan and a clear focus on how to execute the plan.  Because software un-silos the data across the organization, a company would need to evaluate current capabilities in warehouse management, purchasing procedures and even manufacturing workflow to understand where the program fits into overall business goals.
  3. Assess Technical Options – Different companies have different capabilities in terms of IT expertise and infrastructure.  Understanding what the technical needs are can help determine the type of software, the method of deployment and the learning curve and training required.  While each operation will be different, the strength of cloud-based software such as DemandCaster’s Inventory Planning and Optimization platform mean that lack of IT infrastructure and skillsets doesn’t exclude small and medium sized companies from deploying a world class inventory planning solution.
  4. Continuously Improve Processes – The power of digitized inventory planning means that trends can be identified faster and accurately.  This impacts areas both upstream and downstream from inventory control allowing them to improve manufacturing, purchasing and other internal  processes due to the capabilities of the system and the utilization of real-time data.
  5. Prioritize and Create a Roadmap – Buy in is more than just getting teams of employees to adopt the system.  Decision-makers at the executive and C level must prioritize digitization as a key business goal and understand its value.  From this, they can create a roadmap that drives the digital initiative and lay out a path for progress and success.

By following these steps, the barriers mentioned can be eliminated.  With today’s cloud-based inventory planning and optimization software, there is little reason not to undertake a digital path to improvement.  With software that helps balance demand forecasts, safety stock models can be developed with advanced analytics that run “what-if” scenarios to optimize inventory.  It allows for companies to accurately forecast time-phased inventory across the entire organization, automating timing and quantity for replenishment.  And it allows automated purchasing that can prioritize items by revenue, margin or cost to plan inventory that improves service levels while holding down costs.  

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About the Author

Plex DemandCaster Supply Chain Planning

Since joining forces with Plex, by Rockwell Automation, in 2016, we’ve harnessed the power of its Smart Manufacturing Platform and industry knowledge to offer a digitized supply chain planning product. It seamlessly unites your business from the plant floor to the executive suite. To learn more about how we are bringing the Connected Enterprise to life across industrial enterprises, visit

Plex DemandCaster