How do you quickly improve your inventory management?

Stock management is a key optimization factor for increasing your return on investment.

All products and materials purchased and stored are valuable in their own right: but when your stock is mismanaged, that investment can be considered as wasted.

The more efficient your stock management, the more you increase your ability to meet demand while avoiding losses. What’s the quickest way to improve stock management? In this article, we look at some reliable and effective methods to improvement management of your stock.

The importance of good stock management

Good stock management has to be one of your priorities. Optimized stock management brings many benefits for your whole supply chain. Here's what you need to know about stock logistics and the benefits of managing it effectively.

What is a logistics inventory?

You are legally required to conduct an inventory of all the products you hold in stock at least once a year. This is what we call the logistics inventory. Such an inventory allows you to precisely gauge the difference between the SKUs entered in your computer system and those actually present in your warehouse.

This inventory must be comprehensive, and can cover different types of items:

• Raw materials;
• All components used in the production of goods;
• Goods in production which are therefore not yet available;
• All products that can be sold;
• All consumables;
• All parts and components that will be used in products requiring repair.

There are several ways to inventorize your stock, such as:

• Cycle counting: not all products are counted at the same time, but on a rotating basis, e.g. according to their storage location in the warehouse;
  
• Periodic inventory: you set a specific date for the inventory, such as monthly or manually.
  
• Perpetual inventory: also designated computer inventory. With this method, the inventory is updated in real time, whenever an SKU is moved. However, this method may be unreliable since it does not take into account e.g. theft. Physical inventories must still be conducted occasionally to determine the difference between real stocks and the theoretical stock recorded in the system.
  

Why is it important to manage your stock properly?

Efficient stock management brings you many benefits:

• Reduce waste, losses, returns;
  
• Reduce costs: waste and spoiled, stolen or overstocked products all have a hidden cost that affects your efficiency as well as your sales. With efficient stock management, you can avoid unnecessary financial losses;
  
• Provide better service to your customers: well-managed stock allows you to make sure customers receive the goods they ordered. Consumers tend to take an intransigent stance when they buy a product marked as in stock only to be informed that their order has been cancelled or delivery will be late due to an error. The better you manage your stock, the more customers you can satisfy - and retain.
  
• Gain a clear picture of the most in-demand goods and those that are moving slowly or not at all.
  

With good stock management, you can make informed decisions

You know exactly what you have in stock, so you have full visibility of the goods in your possession, goods you need to order more, and goods you need to order less.

This allows you to better manage your storage cycles, and you can easily decide which products are first to be taken from stock.

Four tips to improve stock management

As we have seen, stock management is critical to the success of your business. Here are 4 tips to optimize stock management and maximize the resulting benefits.

1. Optimize your stock management processes

To optimize management of your stock, you have to implement effective stock management processes. You need to know at every moment what goods are stored, where, how and for how long, but also the quantities needed to satisfy demand over a given period.

There are several methods of controlling your stock, both manually or via computer:

• Minimum stock level: a minimum level is set for each stock item. When this minimum is reached, a restocking order is issued. This is particularly useful for avoiding shortages of goods in high demand or which are regularly ordered by customers.
  
• Stock review: you review your stock on a regular basis to issue restocking orders for all SKUs whose minimum threshold has been reached.
  
• Just in time: the objective of this stock management method is to reduce costs by storing SKUs in very small quantities. The idea is to store and provide only what is desired, when requested. With this method you are part of an extremely lean production model, and you must ensure that the suppliers you work with can supply you with the goods almost immediately, if necessary.
  
• Economic order quantity (EOQ): this method applies a complex formula for determining the correct volume of products to be stored. The formula is very difficult to calculate, however, and it’s easier to rely directly on stock management software.
  
• The FIFO method: FIFO stands for “first in, first out”. It’s a particularly useful method for perishable products or products that are prone to obsolescence. When goods arrive in stock, they are entered in the system and made available for delivery.
  

Note that excellence in stock management is not only an asset for an optimized logistics inventory: it also has a direct impact on costs, productivity and customer satisfaction. Stock management is therefore a field in its own right, and one that needs your attention.

2. Label and name your stock

In a warehouse, organization is crucial to the optimal functioning of the supply chain. Good organization requires stocks to be labelled and named.

Good labelling allows you to track goods closely as they move along the supply chain, so you know exactly what you have in stock at any moment. There are other advantages to labelling, too:

• Loading controls;
• Reception and tracking of goods;
• Ensure that regulations are strictly enforced, including those applicable to perishable products and products which may include potentially toxic components;
  
• Reduce the risk of human error;
  
• Reduce costs: with fewer errors and better tracking, you reduce your financial losses and increase productivity;
• Shorten order picking and delivery times;
  
• Ensure that all products not meeting quality thresholds are removed from the circuit;
• Continuously improve service quality.

Using a labelling technology lets you know exactly where your goods are. You can choose between two different technologies:

• Radio identification: such as RFID (Radio Frequency Identification)​ or E-Kanban;
• Barcodes.

Also, it’s a good idea to name your stock precisely - that way you know exactly where it’s located geographically in your warehouse.

3. Introduce cycle counting

Investing in stock management software is a good idea. It saves you time and gives you a full view of your inventory status in real time.

However, as we saw above, this method only counts “visible” movements of goods. There may therefore be a disparity between the information recorded in the system and your real stock levels. This may be due to theft, or simply to mislabelled products.

Therefore, it’s advisable not to rely solely on the software and to carry out a physical inventory at regular intervals, to correct any errors in your continuous inventory count.

4. Consider automation!

Process automation is an effective way to manage your stock while saving time and reducing errors.

Automation can also be extended to other elements of your supply chain, such as order picking.

The benefits of automated storage and order picking are numerous:

• Higher productivity;
  
• Fewer errors:
• Better visibility of goods on their journey along the supply chain;
  
• Better stock tracking;
  
• Less unnecessary legwork to retrieve or deposit goods;
• More safety for teams etc.

Automation is clearly the way ahead for optimized warehousing, as it improves stock management and makes inventories easier to conduct.

Stock management has a direct impact on a company’s productivity and sales. Well managed stock brings all kinds of benefits. But poorly managed stock can threaten the very survival of your business.

That’s why it's important to manage your stock as well as possible. By following our advice and applying the methods proposed, you can quickly improve stock management in your warehouse.