In any warehouse, management of stock is essential and without the correct processes in place, production lines can be halted, deadlines missed and huge financial losses can result.
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If you overstock materials, this large investment of cash is tied up until the item is sold or used in production. Real success lies in overseeing and controlling the ordering, storage and usage of inventory, ensuring that the right stock is available in the right quantities when it’s needed.
Here are a few commonly used practices to keep stock coming and going in a steady and efficient flow:
1. Just-in-time inventory management
This practice involves an on-demand approach in which materials are only ordered or produced when the need arises.
Related: Important inventory management insights you can’t afford to overlook
This offers cost-saving benefits because stock storage is kept to a minimum and the need to discard unused inventory is largely removed. The key to this system’s success is the close collaboration between all companies within the supply chain to ensure inventory availability.
To prevent stock shortages careful planning is needed, taking sales trends and seasonal fluctuations into account.
2. ABC Analysis
This is a system used to classify items according to their value so that energy is focused on the products that bring in the highest income or greatest use potential. Using this method, you can pin down the items that are vital to have in stock at all times and reduce the frequency of re-ordering.
Stock is broken down into three categories:
- Class A items are the most valuable and popular, accounting for 70-80% of your sales or usage. These items are often costly and require tight control and monitoring. A-list products have a high re-ordering frequency to ensure adequate supply.
- Class B items are of moderate importance, accounting for 10-20% of your revenue or input. Less regular restocking is needed, but often there are larger quantities in stock as they often have a lower value than class-A items.
- Class C items are then the smaller items that contribute to just 10% of your income or production. Using ABC analysis, stock planners are able to do more accurate demand forecasting to manage stock levels.
Related: Supply chain management for business growth
3. Inventory Management Software
Every warehouse has to conduct regular stock audits to keep a tally of inventory levels. Manual stock-takes are time-consuming and result in human error. Through the use of technologies such as barcodes, RFID and inventory management software, stock reviews can become a simple, accurate process. Inventory management software gives a real-time overview of stock quantities and where they are in the supply chain process.