Having an effective order and stock control management system is a crucial factor in achieving effective financial performance. It is vital for companies to have well-managed and controlled stock. Your key focus in this area should be to maintain an optimum level of stock at all times.
The essentials of stock management are controlling and planning. In general terms there are three important factors:
- How often should you determine the optimum stock level for each item?
- When should you place an order to your supplier?
- What is the optimal re-order quantity?
Monitoring and controlling your stock should be a core activity in your business. This gives you visibility of the stock levels and allows you to make better decisions. You reduce costs by not losing merchandise and you are able to offer your customers better service. Having optimal stock frees up your cash flow.
What is a Stock Control Management System?
A stock control system is the mechanism through which a company manages the efficient movement and storage of its goods, flow of information and resources that arise from this.
Stock Control Indicators
To fully understand stock control you should consider three key components:
A. Maximum Stock
Maximum stock is the maximum amount of a particular item that you want to keep in your stock. While it is in stock, it is a cost to your business. Some companies consider it desirable to have a large stock when:
- The product has a very high turnover.
- Storage cost is low and transportation cost is high.
- Supply timeline by the supplier is long.
- There is speculation about increases in the price.
B. Minimum Stock
This is the minimum amount of certain items you want to keep in stock. Where demand peaks unexpectedly, you may create a problem of supply and loss of revenue for the company because of unmet demand.
When should a company be interested in maintaining low inventory levels?
- When delivery time from your supplier is immediate.
- When order costs are low, regardless of frequency or amount.
- By identifying the item as slow moving and high cost.
- By having a lot of confidence in your agreements with suppliers.
- There is speculation that prices will decrease.
C. Reorder Point
This is the stock level at which you place the order to restock your stock level.
Benefits of a Stock Control System
Management and stock control is a process that has a great impact on all operational areas of your business and is a key aspect of administration.
When competition is very strong, companies should always ensure a balance between supply and demand.
Having a stock management system brings many advantages to your company to provide important information in real time to help better planning and to make appropriate decisions.
Some of the benefits you will get by having a stock control system in your company are:
- Raising your level of customer service quality, reducing the loss of sales due to lack of product and generating greater loyalty to your company.
- Improving cash flow of your company and having higher inventory turnover.
- Being able to identify seasonality in your products will help you plan better.
- Easily detecting slow-moving items to develop strategies to get rid of them easily.
- Reducing your freight costs for further planning and reduction of emergency purchases.
- Monitoring the quality of the products to have them well identified and monitored.
- Releasing and optimizing space in your stock to increase profitability per square meter of storage.
- Controlling inputs, outputs and location of the goods.
Implement a stock control management system as soon as possible to improve your company’s financial performance and operational efficiency.