What Are the Best Practices for Stock Control Optimisation?
One of the biggest balancing acts for manufacturing and retail industries is ensuring sufficient product availability for customers while minimising the risk of overstocking. Here’s a look at how you can optimise stock control to achieve this balance.
Inventory Optimisation vs Inventory Management
Just to touch on the terminology, it’s important to differentiate between inventory optimisation and inventory management.
- Inventory management is the order, managing, storing and moving of your stock.
- Inventory optimisation is more specialised, such as ordering the right products in the right quantities so as to meet your demands.
However, it’s safe to say that the two do work together to ensure your business is running as cost-effectively as possible.
How Do You Optimise Stock Levels?
At the heart of it, stock optimisation is achieved through forecasting demand and then managing the supply variables within your particular inventory parameters. There are certain techniques that you can implement within your business to optimise stock levels, thereby lowering costs and boosting your productivity.
What Are the Best Practices in Inventory Optimisation?
Businesses that aren’t looking for ways to optimise inventory are missing out on massive cost-saving opportunities. With the development of digital techniques, it’s becoming much easier to optimise stock. Here are a few of the current best practices.
Internal communication within your business, as well as external communication with your supply chain partners, must be optimised to ensure collaboration. This will guarantee elements such as quality control are checked at every stage, with more efficient overall operations.
Consider a Just in Time (JIT) Inventory System
The JIT inventory system means having the right products and materials at the right place in the right quantity. This is a form of cost-minimising as you save on storage. To implement the JIT system, you need to develop strong relationships with suppliers, reduce your production cycles, improve quality control and implement accurate forecasting.
Track the Supply Chain
Modern businesses need to rely on up-to-date information across the supply chain so that everyone knows the location of the stock at all times. New technology – mobile devices, barcode scanners and tracking devices – all work to improve your tracking of the supply chain. This real-time data lets you know if something is wrong so it can be immediately rectified, and you can also identify cost-saving solutions through this overview.
Create an Inventory Plan
Using inventory optimisation software, you’re able to gather accurate data that can then be used to create an effective inventory optimisation plan. The data required will be your current inventory, lead time, standard costs, orders and Bill of Materials (BOM). By implementing a clear inventory plan you can be assured of standardisation across operations.
Use Consignment Inventory
To decrease the cost of inventory and optimise stock control, you can look at implementing consignment inventory so that a portion of your inventory is stored with your supplier until it’s sold. Online retailers often use consignment inventory, only buying the actual inventory when it’s been sold.
Manage Pipeline Inventory
For eCommerce retailers, in particular, pipeline inventory can be an area to reduce cost. During this stage, the stock is under the control of third parties, sometimes being imported across borders. By improving pipeline inventory, you’re minimising risks associated with missed orders, late deliveries, manufacturer mistakes and delivery delays.
Minimise Lead Time
This is the length of time it takes from ordering inventory to delivering the goods. When your lead time is too high, you’re holding onto safety stock and this leads to bigger holding costs for extra storage. To minimise your lead time, you have to develop strong supplier relations thereby negotiating faster lead times and improving flexibility for re-ordering.
Improve Inventory-holding Costs
Whether the stock is stored in your warehouse or by a third-party operator, it’s important that you practice efficient storage with better layouts, and updated handling equipment. Effective use of storage space is vital, but you can also look at alternatives to warehouse storage, such as third-party storage or vendor-managed options.
More Effective Forecasting
One of the most impactful stock control optimisation techniques is improving your forecasting – determining whether you need to increase or reduce stock levels. You can incorporate stock optimisation software to manage data from a variety of sources so that you’re benefiting from accurate forecasting. This will determine seasonal shifts in purchases and anticipate fluctuations in demand.
It’s important that you don’t remain complacent in your inventory optimisation, but rather constantly seek ways to make improvements. This will ensure you meet complex and ever-changing customer demands and keep up with competitors. It requires periodic reviews, running continuous improvement programmes, and reducing cycle and lead times. This can be done by establishing data-driven decision-making for the business.
What Are the Benefits of Stock Control Optimisation?
When you implement best practices for stock management and optimisation, you’ll immediately start reaping the benefits associated with enhanced storage. Here’s a look at a few of the benefits you can enjoy.
Lower Working Capital
You’re actively decreasing the amount of capital by lowering the amount of inventory stored. This provides you with sufficient financial savings that can be redirected elsewhere.
Reduce Turnaround Times
Using effective stock optimisation practices, you’re able to improve turnaround times through effective forecasting and minimising lead times. This results in less excess stock and the need to sell stock at reduced amounts later on.
With supply chain oversight, you’re improving operations by ensuring products are getting to customers on time. There are much more efficient operations as you’re not impacting the flow of products.
Your accurate forecasting and improved supply chain management mean that your customers get what they want when they want – which equates to a better customer experience. With optimised processes, you’re driving brand loyalty.
A system that works makes for a happier workplace. By following best practice for stock, your staff is confident in the knowledge that they’re selling the right products to the right people. They’re also empowered in tracking the product through supply chain transparency.
Contact Omni Accounts, leading suppliers of digital solutions that improve operations quickly and effectively. They can provide you with the ultimate stock control software that takes the hassle out of daily operations.