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How to Build a Supply Chain Plan

Managing supply chains can be an incredibly complex and challenging task. One way to reduce complexity is to build a supply chain plan to familiarize yourself with each process step. An effective supply chain plan will help you break down the complexities of supply chain management and enable you to eliminate guesswork and simplify decision-making. We’ve broken down how to build a supply chain plan into seven easy steps to alleviate your stress and set you up for success this year. 

No. 1: Choose Your Inventory Assortment 

Nobody knows your customers better than you. Trusting your knowledge is vital, but relying on data to confirm your inventory selection is even more important. One tried and true method is to examine your sales history to determine what will sell well in the future. If you’ve been in business for several years, creating a data set that showcases the last three years of purchase trends will provide a solid aggregate view of the right assortment needed. If your business is new and there is little to no data to study, it’s best to begin with a small assortment of SKUs. As you grow, you can scale and add more as time goes on.  If you start with too many you may quickly run into problems. 

No. 2: Forecast Demand

Forecasting demand is one of the most critical steps in building your supply chain plan. You always want to avoid the pendulum swing of buying too much or too little inventory and avoid lost sales or stockouts. To ensure the greatest accuracy as your business grows, you need a robust system to handle inventory management. A significant benefit of software solutions is having a single source of truth that can interpret the data for you, down to small details like product variation and color. Proven software solutions can help nail down demand forecasting without the hassle.

No. 3: Plan Inventory Buy

Once you have a reliable demand forecast in hand, the next step is to plan for purchasing. It’s important that you have sufficient inventory to meet your forecasted demand, as stockouts can damage your brand, and excess inventory can become costly.

To make a proper inventory plan, align your demand forecast with your current stock on hand and the inventory you expect to receive. The goal is to order enough products to fill in the gaps between what you have on hand, what you expect to receive from existing purchase orders, and how much you plan to sell in the future. Of course, you’ll also want a bit of a buffer – but not too much! Safety stock can also be costly when miscalculated. Automating this process reduces the need to worry about mistakes. 

No. 4: Track Purchase Orders

Now that you’ve placed your purchase order with your supplier, you’ll need to track those purchases. If there are any issues, such as damaged items or anticipated shipping delays, tracking your purchase orders will keep you abreast of the information so you can plan accordingly. Fortunately, there’s software that simplifies this process, too.

No. 5: Track Inventory

Once your inventory is in transit, you need to know where it is, how it’s getting to you, and when it will arrive. If you don’t know whether your products are on a boat, a truck, or already in the warehouse, you can’t plan how you will get them delivered to customers. To avoid these issues, a solution that tracks your inventory and gives updates automatically will streamline the management of this process and give you more time to strategize on other areas. As you expand your inventory, it becomes even more essential to have an eye on it at all times.

No. 6: Understand Inventory Position

At last, your inventory shipment arrives. You now need to determine how much stock you have in total and where it is located within your network. Some companies manage this information independently, while others work with a third-party logistics provider (3PLs). Many small-to-mid-sized companies will opt to work with a 3PL since they tend to have ample experience in this area. However, we recommend managing your warehouse internally with intelligent software if you want to maintain more control of your supply chain.

No. 7: Fulfill Orders Conclusion

The final stage of the process is to get your products to your customers! This is one of the most important steps in the supply chain process, and it entails two elements: order management and shipping and logistics.

The order management process is when you ensure you’ve allocated the right amount of inventory to each leg of your business, such as the eCommerce site, the retail store, the wholesale business, etc. For example, if you allocate your products to the wrong place, a customer placing an order online may not receive the product even though you have plenty of stock in another location. Effective order management prevents this scenario from occurring.

Shipping and logistics are how your goods are packed and shipped to customers. At this stage, customers tangibly interact with your brand, and you want to ensure they are satisfied. Positive customer response is the ultimate – and most profitable – goal of a supply chain business.


Your business can operate like a well-oiled machine with a supply chain plan in place. Knowing where to start can seem daunting, but with the proper tools and insight, you can create – and adjust – without threatening your profit. Learn more about the supply chain process by visiting our insights page or contacting us today.