What is inventory planning?
Good inventory planning keeps the right products in the right place at the right time, so orders ship on schedule without cash sitting idle on the shelf. It links demand forecasts to supply decisions across every location. The stakes are large: inventory distortion in global retail reached $1.7 trillion in 2026, equal to 6.2% of global retail sales, according to IHL Group’s 2026 Inventory Distortion Study.
Key characteristics
- Demand first: Planning begins with demand forecasting, which estimates future sales from past orders, seasonality, and supplier lead times.
- Timing rules: A reorder point formula signals when to buy. Reorder point (ROP) equals average daily sales times supplier lead time, plus safety stock.
- Order sizing: economic order quantity (EOQ) finds the order size that keeps ordering and holding costs low. Methods like ABC analysis and just-in-time (JIT) help rank which items get attention.
- Balance stock and capital: Too much stock ties up working capital, while too little risks lost sales. Among survey respondents, average inventory turns fell to 6.3 in 2025 from 6.5 in 2024 and 8.2 in 2023, per the 2025 SCMR Warehouse/DC Operations Survey.
Example
Koken USA, a tools manufacturer in Columbus, Ohio, used Fishbowl’s demand forecasting to sharpen how it plans purchases. The result was a 7% decrease in freight costs through optimized planning. Better forecasts meant fewer rushed shipments and smarter order timing.
Related terms
FAQ
What is the difference between inventory planning and inventory management?
Inventory planning decides what to buy, how much, and when, while inventory management is the day-to-day control of stock you already hold. Planning sets the targets, and management executes against them.
What methods are used in inventory planning?
Common methods include economic order quantity (EOQ), ABC analysis, just-in-time (JIT), reorder points, and safety stock. Most teams blend a few of these rather than leaning on one.
Why does a single stockout matter so much?
A stockout costs a sale today and can cost the customer for good, since two-thirds of US consumers will switch to a different retailer when an item is unavailable, according to AlixPartners (2024).