6 points to consider when managing stock levels in your business
How you manage your stock will depend on your business model, the type of stock your business uses, how much you need to hold and how quickly it turns over. Good stock management and effective sales forecasting are essential to help you to maintain the correct level of stock to meet customer demands. Poor management of stock including low stock levels or outages will inevitably lead to delayed deliveries, potentially affecting the bottom line and client relationships.
Managing stock efficiently is imperative to the running of any business. Below are some things to consider when looking at your stock management process:
- Keep stock to a minimum: excessive stock is dead money. The bigger the stock, the more space is required, which of course leads to bigger overheads. For example, holding a stock of slow moving furniture will cause more of a problem than an excess of 5mm buttons, despite the fact that they might be of similar value. Ensure you or your management team are aware of the type of stock you hold and the available space you have to hold it
- Never take your eye off stock levels. Are they increasing or decreasing? Who is doing the buying? What is the overall buying strategy? Have a think about whether you are actually buying more than you need just to get quantity discounts.
- Calculate the ratio of stock to sales. Are you getting a good return on investment from the stock you are holding?
- Avoid holding stock by arranging direct shipments from suppliers to clients, or requesting immediate delivery from a supplier. In the digital age there are many opportunities to run a virtual company without the need to keep stock on premises, meaning less space needed. Could you supply your product/service via a third party such as Amazon, E-bay or Etsy?
- Do you perform an annual stock take? Is it accurate? How are you valuing your stock? Is old stock still saleable? Are you writing off obsolete stock in your accounts? If not, you are over-valuing the company.
- Can you negotiate sale or return terms with suppliers, so that you only pay for the stock you use and are able to return the rest? This will certainly save you money in the long term.
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