At first glance, it’s easy to think that planning inventory for a B2B business is not that different to planning inventory for B2C.
However, both require specific and fundamentally different strategies to succeed.
Unlike B2C inventory planning, which centers around lots of individual direct-to-consumer sales, B2B inventory planning involves large order volumes, long lead times and complex logistics – especially when it comes to storage.
Following the popularity of our on-demand masterclass on B2B forecasting, this blog is a simple, jargon-free guide to help you master the art of B2B inventory planning.
We’ll cover:
- What is B2B inventory planning?
- What’s the difference between B2B and B2C inventory planning?
- Why is B2B inventory planning so important?
- 3 core components of B2B inventory planning
- 5 Common mistakes in B2B inventory planning
- How to choose the right inventory planning software for B2B
What is B2B inventory planning?
B2B inventory planning is the process of working out how much stock you need and when you need it for a business that sells directly to other businesses.
Inventory planning involves analyzing historical sales, market trends, promotions and supplier lead times to predict future stock requirements.
Good B2B inventory planning ensures you can meet demand without overstocking or stockouts. It can lead to cost savings, improved cash flow and better customer satisfaction.
What’s the difference between B2B and B2C inventory planning?
The stakes are much higher for retailers planning B2B inventory, compared to B2C.
That’s because B2B inventory planning involves significantly larger order volumes. Precise planning is essential to ensure sufficient stock without overwhelming warehouse capacity.
Plus, while B2B merchants typically have shorter supply chains, they tend to deal in longer lead times. That means precise timing is critical.
Why is B2B inventory planning so important?
As our expert panel discussed in our free B2B planning masterclass, a single misjudged or mis-timed B2B order can result in stockouts or overstock – and have a rapid and potentially devastating impact on cash flow.
There are a number of cost-related benefits to getting inventory planning right, such as:
- Lower costs
Storing and looking after bulk inventory is a major expense. The less inventory you hold for less time, the better for your bottom line.
- Better cash flow
Placing accurate inventory orders with the correct lead times factored in can have a dramatic impact on your cash flow.
- Fewer costly errors
Errors in order processing can lead to dissatisfied customers and lost sales. Accurate inventory planning ensures you have the right products available.
- Better finances
Good inventory planning streamlines the entire purchasing process, helping you budget better, eliminate financial discrepancies and have better control over your spending
- Smoother scaling
A solid approach to B2B inventory planning means you can add new channels or expand into new markets without worrying about how you will cope with the added complexity growth brings.
3 core components of B2B inventory planning
1. Demand forecasting
To be able to reliably buy the right inventory at the right time, B2B merchants first need to forecast what they are likely to sell. This is easier said than done – especially if you are relying on outdated methods, including spreadsheets.
Your demand forecasting must include various factors. Historical sales data is the most obvious – and arguably the most important.
Historical data provides vital insight into past demand patterns, seasonal fluctuations and customer buying behaviors. By analyzing this data, businesses can predict future demand more accurately, avoiding overstocking or stockouts.
It’s also essential to constantly factor in wider market trends, with an awareness that these can change (sometimes literally) overnight. By anticipating customer preferences and market developments, you can tweak your inventory levels accordingly, cutting the risk of being left with the wrong stock at the wrong time.
Cutting-edge demand forecasting software can take the stress and legwork out of demand forecasting – and the best forecasting tools for B2B, like Inventory Planner by Sage, are designed to provide reliable predictions for thousands of SKUs at high volume and high frequency.
2. Reliable buying recommendations
One of the reasons manual inventory ordering is so time-consuming and error-prone is because it relies on guesswork and discrepancies between how different people within the same business interpret forecasts.
It’s easy to end up with warehouses blocked by piles of so-called safety stock that has tied up all your spare cash.
Inventory Planner provides the antidote to this with its simple, easy-to-understand B2B purchasing recommendations for all variants, brands, custom categories, suppliers and locations.
This buying recommendations report clearly recommends exactly which items to buy and the perfect moment to buy them (alongside handy extra information, like the cost of delaying your order).
The report, which is based on accurate forecasts and kept consistently up-to-date, is a proven way to avoid excess stock, as well as save time and streamline the ordering process.
3. Real-time inventory tracking
As a B2B retailer, your inventory is your biggest asset. That’s why it’s so essential to constantly track your sales against forecasted demand to ensure a stockout or overstock event isn’t around the corner.
Attempting this manually is a recipe for disaster. Market-leading inventory planning technology with custom reporting is vital.
With real-time tracking and more than 200 metrics to choose from, Inventory Planner by Sage provides B2B businesses with complete visibility into inventory levels and movements, across multiple locations.
It even offers proactive alerts and a detailed overstock report so you can respond quickly to demand changes and manage your stock efficiently.
5 common mistakes in B2B inventory planning
1. Relying on spreadsheets
Many B2B merchants rely on clunky, manual approaches such as Excel spreadsheets to forecast demand. This is notoriously inaccurate, error-prone and fails to provide the accuracy and reliability that’s so important for successful B2B demand forecasting.
2. Relying on guesswork
Without reliable buying recommendations from cutting-edge software, some B2B businesses use ‘gut feeling’ or guesswork to help them decide what to order. Like using spreadsheets, this is a sure fire way to end up with stockouts or excess stock.
3. Using safety stock as a strategy
When you’re worried about running out of stock and disappointing your B2B customers, it can be tempting to overbuy inventory to use as ‘safety stock’. However, this is incredibly risky – especially when cash flow is already precarious – and often results in excess stock that needs to be liquidated.
4. Failing to factor in demand variability
Even if initial forecasts are accurate, it doesn’t mean they can’t change at a moment’s notice. For accurate demand forecasting in B2B, it’s vital to constantly assess trends and sales. The right software makes this easy and proactively alerts you when demand dips or spikes.
5. Lack of analysis
Monitoring everything from your supplier performance to your level of overstock is vital to successfully plan inventory for your B2B brand. Access to customizable reports and cutting-edge analytics can be the key to staying ahead of the curve.
How to choose the right inventory planning software for B2B
Not all inventory planning tools are created equal. When forecasting and purchasing inventory for a B2B business, you need a solution that’s built to reliably handle large volumes.
Here are some key features to look out for:
- Advanced forecasting
Look for advanced solutions that analyze historical sales and market trends to predict future demand accurately
- Reliable buying recommendations
Software that provides reliable guidance on exactly which items to reorder, right down to variant level, can remove the guesswork from B2B inventory planning and save so much time.
- Customized reporting and analytics
Advanced reporting and analytics tools are essential for gaining insights into inventory performance, identifying trends and making data-driven decisions.
- Automated PO creation
Automating the creation of your purchase orders can dramatically cut your manual work, reduce errors and help ensure you order on time.
- Real-time inventory tracking
Ensure the software you pick provides real-time visibility into inventory levels, factoring in multiple locations and channels.
- Supply planning tool
This is important for larger B2B retailers to accurately work out how much inventory to buy, according to units, cost or revenue. Most inventory planning solutions don’t offer this; Inventory Planner does.
- Supplier management
Your relationships with your suppliers are the backbone of your B2B business. Look for a B2B inventory planning tool that will help you streamline communication, track performance and manage lead times efficiently.
🎥 Want to learn more? Catch up on our free masterclass all about B2B inventory planning here.