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Managing your stock
How you manage your stock will depend on the type of stock you use and how much you hold. Good stock management will help you maintain the right level of stock to meet customer demands.
When you are managing your stock, consider quantities, sales and storage. If you have slow-moving stock, consider reducing your stock levels by returning items to suppliers. You may also try to sell slow-moving items in a sale. This may reduce your profitability but free up your storage and improve cash flow.
When buying stock, consider:
- stock shelf life
- the ideal amount to order for each item
- your minimum acceptable stock levels
- when you should order stock, based on time or quantity
- how long you need to allow for reordered stock to arrive
- if your stock needs are predictable, whether you can set a fixed quantity or interval for reordering stock
- what terms of payment you can negotiate with your suppliers
- what payment terms you set to manage debtors.
Stock levels and warehouse management
Being aware of the levels of stock in your warehouse is essential for good stock management. Consider:
- how frequently you need to review your stock levels
- how and when you should perform a stocktake
- if you are using your warehouse space effectively
- what record-keeping system suits your business
- if you have security procedures in place
- if your suppliers can hold stock for you
- if your suppliers can deliver directly to your customers.
Sale of stock
It's essential that you keep track of the stock you sell. Consider implementing an easy-to-follow manual or computer-based tracking system.
If you stock perishable items, you need to identify them by date received and sell stock in a strict 'first in, first out' order. This way you can sell the older stock first so it doesn't deteriorate when you are holding it.
In some cases, stock may not be perishable but packaging may become out of date if your supplier has recently rebranded. This may impede your ability to sell the item at full price.
Just-in-time stock control
Just-in-time is a stock control method designed to cut costs by reducing the amount of stock you hold to a minimum. If you employ a just-in-time method, you will only keep the exact amount of stock you need at any one point, and your suppliers will hold the rest.
For a just-in-time system to work, you need to be confident that your suppliers can deliver on demand. You will also need to keep in mind that there is a risk of running out of stock, which you should address in your risk management plan.