Stock management

Maintaining the best level of stock is not easy. It is a balancing act.
The competing needs are:
- Minimize the investment in stock
- Be able to satisfy customer needs 100% of the time
- Never have stock that cannot be sold or used within a determined time-frame
There is no more critical part of a business than the inventory area.
There are various styles of stock management with probably the most drastic being JIT (Just in Time).
Often seen in the automotive industry, this is great when everybody works to the “plan”. But this can leave a business up for ransom if there is a single hiccup in your suppliers’ supply chain. Be very wary of this style.
If your components or raw materials can be purchased on a one day (or less) lead time, inventory control is not critical compared with a business that imports parts.
All accounting systems give you a stock/inventory module (sometimes optional).Check here new inventory management software

How to manage your stock properly

Buy stock when it suits you, not the supplier

Many businesses buy when the sales representative calls in or if they are offered a discount. You should buy stock when it suits you and your needs, not those of your supplier. Discounts can be a big trap. Ask yourself why they are discounting. Do they know something you don’t? Is there a new product coming up that will supersede the sale item? You need to measure the cost of having that stock sitting around against the discount being offered. If it’s going to cause cashflow problems, perhaps it’s not worth it.
Invest in a stock management system

Stocktaking is a necessary evil. You need to check stock levels regularly, not only for tax purposes, but to know your profit levels.

There are literally thousands of stock management systems available which can reduce the need for manual stocktaking. These systems report on stock searching, stock receiving, bar-coding, special pricing, sales orders, picking and packing, dispatch register, order fulfillment, product specifications, stock usage and reordering requirements.

Obsolete stock can be a real hiding place for cash. It can be heartbreaking to have to sell items at a loss, but if they are going to sit there forever, you may as well turn them into working capital to spend on better selling items.

If you have good records you are also more likely to know just how much you are purchasing from suppliers. This puts you in a better bargaining position when it’s time to renegotiate.
Watch top performers

Finally, keep an eye on industry benchmarks. Good benchmarks should include stock days for the low, average and top performers in your industry. You will find the stock days of top performers are fewer than those of the others.

In a nutshell, shortening the length of time stock sits in your store room will free up working capital to spend on other things like advertising, salaries and expansion.

Has your business reaped the rewards of better stock management? What worked for you?

Stock on hand

Stock needs to be available for sale when your customer is ready to buy. But because it sucks up cash to have it waiting to be sold, it is good stock management to keep stock on the shelf for the shortest possible time.

Think of stock as fifty dollar bills piled up in your stock room. This is a good incentive to manage stock at every stage. Vital to this objective is knowing the sales cycle of your products, that is, how long it takes from when goods arrive until they are sold. The time goods are sitting in stock is called stock days. One way to calculate stock days using your financial reports is as follows:

Stock on hand ÷ Cost of goods x Time period = Stock days

Stock on hand means the dollar value of stock in store at a given date. Cost of goods means the direct cost of getting the goods ready for sale including purchasing, freight and store costs but not fixed overheads like administration, wages or advertising. Time period is the reporting period upon which you are basing the other two numbers.

Stock management

An ergonomic study was carried out in two warehouse superstores of a leading company in the retail sector which specializes in office supplies.
In this study close attention was paid to the interaction between stock volume, its movements on the sales floor, and the available storage space. Results indicate that an imbalance between the amount of stock and the available storage space results in three types of consequences:
(1) risk factors related to the development of musculoskeletal disorders such as extra manual materials handling operations, awkward postures and an increased physical workload;
(2) increased risks of accidents, particularly related to loss of balance and falls from heights; and
(3) impacts on productivity and quality of service offered to customers in the form of time wasted, stock losses and customer dissatisfaction.

The solutions proposed relate to the implementation of strategies that maximize the use of storage space, a more appropriate management of this storage space, and recognition for team work among employees involved in the manual handling activities of the various products and goods. Although important parameters to consider were identified at the time of an intervention on stock management, the importance of doing a store by store analysis of the impact of the company's policies on stock management is emphasized. Relevance to industry Stock management is at the core of warehouse superstores' common activities, but very little is known about its impacts on daily manual materials handling activities of employees. This study describes some of the factors that must be considered to prevent negative impacts related to dysfunctions in stock management in the emerging sector of warehouse superstores.