Inventory Allocation Ensures Your Best Customers Get What They Need

Companies today juggle complex sales channels, diverse customer segments, and geographically dispersed operations. Managing inventory effectively becomes paramount, especially when faced with supply chain disruptions or limited stock availability. The question arises: how do you ensure your most critical sales channels, valued customers, and strategic promotions get the inventory they need?

Enter inventory allocation, a powerful tool within Microsoft Dynamics 365 Supply Chain Management's Inventory Visibility service. It empowers you to virtually pre-allocate your on-hand stock during the sales operational planning phase, even before actual sales occur. This proactive approach offers a double advantage:

The Importance of Inventory Allocation

Inventory allocation involves strategically distributing available stock across various channels, regions, and customer groups to optimize supply chain operations. This process ensures that critical demand areas are prioritized and stock is protected from being consumed by less important needs. Effective inventory allocation can help businesses:

• Maximize Customer Satisfaction: By ensuring that high-priority orders are fulfilled, companies can maintain strong customer relationships and brand loyalty.
• Optimize Sales and Promotions: Allocating stock for promotional activities or key sales channels ensures that these efforts are fully supported, leading to better sales outcomes.
• Enhance Operational Efficiency: Proper allocation reduces the risk of stockouts and overstock situations, leading to more streamlined operations.

Key Features of Inventory Allocation

The inventory allocation feature in Microsoft Dynamics 365 Supply Chain Management offers two primary purposes: inventory protection and oversell control.

Inventory Protection (Ring Fencing)

Inventory protection involves safeguarding allocated stock from being used for other purposes. This means that once inventory is allocated to a specific channel or customer group, it is protected from being consumed by other demands. This feature ensures that high-priority orders and critical channels always have the stock they need, enhancing reliability and customer satisfaction.

Oversell Control

Oversell control restricts the allocated quantities to prevent over-consumption during actual sales transactions. This control mechanism ensures that the receiving party does not consume more than the allocated stock, thereby maintaining a balance and avoiding stockouts. By managing oversell control effectively, businesses can maintain accurate inventory levels and fulfill orders more reliably.

Incorporating Inventory Allocation into Sales Planning

To effectively incorporate inventory allocation into your sales planning process, it’s essential to understand and define key concepts:

Allocation Group

An allocation group represents the entity that owns the allocation like a sales channel or customer group. For instance, an allocation group can be a specific region, a type of customer (like VIP customers), or a particular sales channel (such as online stores or physical retail outlets).

Allocation Group Value

The allocation group value is the specific value assigned to each allocation group. For example, in the case of a sales channel allocation group, the value could be "store" for physical retail outlets or "online" for e-commerce channels. Similarly, for a customer allocation group, values could include "VIP" for high-priority customers or "wholesale" for bulk buyers.

Allocation Hierarchy

The allocation hierarchy is a structured combination of allocation groups that determines how inventory is distributed across these groups. This hierarchy helps in prioritizing and managing inventory allocation effectively. For example, an allocation hierarchy might prioritize VIP customers over regular customers or allocate more stock to regions with higher demand.

Virtual Common Pool

The virtual common pool represents the total quantity of inventory available for allocation. It is a virtual representation of on-hand stock that can be apportioned across various allocation groups based on the defined allocation hierarchy. Managing the virtual common pool effectively ensures that all priority needs are met without over-allocating or under-allocating inventory.

The Benefits of Proactive Allocation: A Win-Win for Businesses and Customers

Inventory allocation offers a multitude of benefits that enhance your overall supply chain management and customer experience:

Improved Sales Planning

With a clear picture of allocated inventory, sales teams can create more accurate forecasts and develop targeted sales strategies. This leads to a more data-driven approach, minimizing the risk of overcommitting on orders and ensuring customer satisfaction.

Enhanced Customer Relationships

By prioritizing inventory allocation for valued customers, businesses demonstrate their commitment to fulfilling their needs. This fosters stronger customer relationships and loyalty.

Reduced Order Fulfillment Delays

Knowing exactly where your inventory is going eliminates the guesswork. Allocated stock is secured, minimizing the chances of last-minute fulfillment issues and ensuring timely order deliveries.

Optimized Inventory Management

Inventory allocation allows for strategic stock distribution across different channels and customer segments. This helps optimize inventory levels, preventing stockouts and the associated costs of holding excess inventory.

Conclusion

Proactive inventory management is no longer a luxury – it's a necessity. By leveraging the power of inventory allocation within Dynamics 365 Supply Chain Management, companies can ensure their most crucial sales channels and customers receive the inventory they need, ultimately leading to escalated sales performance, powerful customer relationships, and a more resilient supply chain.

Contact DynaTech Systems to leverage the Power of Inventory Allocation!