For many businesses, December is the time of the year when ineffective inventory management or stock control practices can impact the bottom line. Whether a supplier order was out of sync with demand, lead times weren’t recorded in the system, or real-time data feeds are not being sent to your webshop or branch network; stock frustrations can lead to lost revenue and leave your staff struggling to get the answers they need to sort out problems caused by inaccurate stock data.
But effective stock management isn’t just for Christmas and in this article, we discuss the top 10 techniques for managing your stock effectively. Adopt these techniques and then no matter what time of the year it is, you, your employees and your customers can be sure you have the right stock in place at the right time.
1. Audit Your Inventory
Stock is the lifeblood of your organisation, so having accurate, timely information about stock levels and values is essential. Managing stock with regular inventory auditing affords tight control over your supply and optimises stock control procedures.
Cycle-counting or rolling stocktakes ensure effective stock management becomes part of your business process. It also enforces a culture that values stock efficiency and realises its importance.
With rolling stocktakes, you aren’t waiting until year-end to discover deviations related to demand, supply, theft or other inventory control management errors or process deficiencies. You have a better chance of getting to the root cause of any deviations, adjusting and resolving these issues as they arise.
Modern distribution-driven business software will enable your warehouse team to easily run rolling stocktakes. It ensures your stock valuations are more accurate, your supply chain management processes are more effective, and it removes the need for that onerous end of year stocktake.
2. Implement the First In, First Out System (FIFO)
FIFO is critical when dealing with perishable goods, but even without ‘use by dates’, it’s good practice to ensure you have efficient stock rotation in place.
Old stock is riskier stock. Whilst the item may not have an official shelf life, external factors like shifting demand and wear and tear can render some items obsolete.
An inventory management system can monitor stock on a First In, First Out basis, but ultimately, your warehouse will need to ensure old stock stays at the front to support First In, First Out fulfilment.
However, whilst the process of adopting FIFO is encouraged, valuing your stock on a FIFO basis isn’t always the most prudent exercise.
For example, when dealing with multiple branches, you may create negative practices relating to moving less valuable stock among your warehouses. This is why we would advise considering an ‘Average Costing’ approach to valuing your stock.
3. Draw Up a Contingency Plan
Our customers often manage thousands of SKUs from a range of suppliers with varying lead times, prices, specs etc. All these variables need to be effectively managed to ensure:
- Continuity of supply
- Quality standards are adhered to
- Business and customers are getting the best deal
This is crucial in an instant gratification era where out-of-stocks or overpriced items lead to lost customers who source the product elsewhere online. Therefore, having contingency options to support customer services levels is a must for effective inventory management.
We advise drawing up contingency plans to:
- Ensure the business has alternate supply sources
- Protect cashflow
- Identify warehouse capacity issues
These are all supply chain management elements that should be tracked in your inventory management software. Related KPIs should also be put in place to ensure issues don’t become critical and that your team can effectively put your related contingency plans into action.
4. Set Sensible ‘Par’ Levels
Having the right stock to meet demand is the holy grail of effective inventory management. You don’t want to tie up cash unnecessarily, yet you don’t want to experience lost sales due to out of stocks.
Taking the time to set appropriate par levels or minimum stock levels in your system will yield significant benefits. Much of the work required to understand minimum stock levels can be facilitated by your stock control software.
If required, it can even add more weight to recent data over historic data to ensure recommended stock levels are as accurate as possible. Your system will also enable you to set appropriate maximum and Reorder Levels (Replenishment Levels) and related actual lead times to maintain a “balanced inventory’ approach.
5. Consider ABC Analysis
Not all stock is created equal. In a distribution or merchant facility, managing thousands of lines of stock across an entire warehouse/s can make it difficult to employ stock management procedures.
Categorising your stock by value and importance is an effective way to manage your inventory. ABC classification can be used to identify the most important products in your portfolio and manage them above less valuable stock items.
You can use ABC classification to go through your product portfolio and add each product to one of three categories. ‘A’ type products are high value and need to be managed more rigorously than ‘C’ type items, which may be low value or volume consumables.
By categorising your products and noting how often each product category should be counted in your business software system, this provides your warehouse team with a random list of products to be checked each working day – perfect for keeping tabs on your inventory.
6. Build Solid Partnerships with Suppliers
It’s vital you have a strong relationship with your suppliers to help solve problems, support your delivery time commitments, enable you to innovate, and deliver the quality and value your customers’ demand.
Leaving these relationships to be managed outside your ERP system may compromise the integrity of your supply chain processes. Supplier relationship management is another area that can be managed in your business software.
Often thought of as an informal part of the business, modern software can record valuable information about your supplier network. It can deliver action-based insights, comparisons, and automated review tasks, ensuring you are nurturing and optimising your relationships across your supplier network.
You can schedule ‘in review’ tasks to drive proactive communications, use purchasing data to negotiate loyalty or volume discounts, and manage creditor terms effectively to safeguard your liquidity.
It’s all about using the data in your system to enforce the controls and procedures that will ensure your supplier partnerships are solid and delivering value to your business.
7. Planning Ahead
Predicting stock requirements is a tough ask even if you are a seasoned member of the purchasing team armed with accurate, historic sales data. Events like the coronavirus pandemic can skew supply and demand forecasts, so your purchasing team must have ready access to accurate sales data.
To set up effective replenishment rules in your stock software, you need to ensure your recommended min. and max. levels are set up for each product and are up to date. It’s also important to include supplier lead times to each product and any imposed ‘minimum order values’ or ‘buffer stock’ quantities you wish to hold.
You may also want to take into account shipping costs where it is uneconomic to order small quantities. Think of all the variables you need to take into account and then instruct your ERP solution to build these variables into your projections.
Once complete, you can use these variables to instruct your system to automatically suggest orders for your team to review once a specified reorder level is reached. This saves you having to build orders from scratch and provides you with the confidence that your key variables have been considered.
8. Monitor Sales and Performance
Modern business software includes intelligence tools that deliver the real-time insights you need to spot trends or stock issues and adjust your practices accordingly. Aged stock reports or alerts can highlight stock that is slow-moving and needs to be managed in your business.
You may want to use the data in your system to highlight which products customers are NOT buying. Is there a price, quality, or range issue that the purchasing team can review to help increase sales? You should also set up alerts to inform the team when expected sales differ to projections to help improve forecasting.
9. Track Product Information
Increased regulatory compliance requirements, the need to trace products for quality control, and the additional product information required for ecommerce purposes mean the information businesses need to hold for each SKU has grown considerably.
Efficient stock control solutions should incorporate stock tracking and batch tracking. This means being able to trace a particular item backwards or forwards from source to finished product and identifying the other items in the batch.
In addition to this, many companies need to track particular elements relevant to their way of working. Modern distribution software facilitates the creation of custom properties that enable businesses to track, monitor and report on these specific elements easily, and without any development assistance from the software house.
This ensures the solution remains agile enough to support your business as it changes and is a vital component of a customer-driven supply chain management software solution.
10. Lean on Integrated ERP
An integrated, distribution driven ERP solution brings together all the parts of your business to ensure you can optimally manage multi-branch, multi-warehouse, online sales and multi-jurisdiction all in one integrated platform.
It will provide your business with all of the functionality you need to effectively manage stock, control margins, enforce operational excellence, improve decision making, mobilise your workforce, and more.
Modern ERP distribution solutions, like Intact iQ, will enable you to fully optimise your supply chain processes to help minimise human error, theft, reduce delivery lead times, and increase customer satisfaction levels. It will provide your team with access to real-time stock information, analytics and smart stock controls to ensure they can retain optimum control of your stock from the point of order to the point of dispatch.
At Intact, we specialise in delivering perfect-fit software solutions that align with your business objectives. To learn more about our services and what we can offer, visit the homepage or get in touch via our contact page.