To manage stock effectively, all businesses need to find a balance between the cost of holding stock and the benefits from doing so. Whilst stock optimisation strategies vary enormously from business sector to business sector, the costs and benefits are broadly the same. Costs will include:
- Cash tied up in stock value causing possible cash flow issues
- Higher storage costs
- Higher insurance costs
- Greater chance of obsolete stock & damage
Benefits can include:
- Ability to meet customer demands
- Service differentiation
- Mitigation against volatile lead times in manufacturing, shipping & customs
- Minimise lost sales opportunities
- Greater customer confidence
An optimised stock profile will often include a mixture of higher stock levels of certain products, and lower stock levels of others. Even when a business believes it has reached this level, stocks will need to be constantly reviewed against sales to ensure agile stock profile is achieved. This monitoring also goes hand-in-hand with the reviewing of WMS parameters.
Other changes that can be introduced include differentiating payment terms between suppliers and customers, requesting suppliers to hold and ship stocks directly to end customers and introducing robust perpetual inventory (PI) checking processes. Selling off of obsolete stock as “special offers” at reduce rates, or even at cost, can also be effective.
If your business is considering embarking on a stock optimisation programme and requires help and support in designing an appropriate future stock strategy, give Davies & Robson a call. With many years’ experience in the field of stock optimisation, we can help in achieving the best of both worlds in reducing inventory costs and increasing sales & service.