Managing Stock Levels

What is the importance of managing stock levels?

Maintaining optimal stock levels ensures that your business can fulfil orders smoothly and on time. Poor inventory management can lead to several issues, such as :

• Insufficient stock to meet demand
• Excess stock taking up valuable storage space
• Deterioration of goods while in storage
• Increased holding costs
• Missed sales opportunities

These challenges can negatively impact your customers, damage your reputation, and ultimately affect your sales. Optimising stock levels is essential for business success.

Common Ways of Managing Stock Levels

There are several techniques businesses use to manage their stock effectively. Here are some of the most common methods :

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First In First Out (FIFO)

‍The FIFO approach ensures that the first stock to arrive at the warehouse is the first to be despatched. This method is particularly useful for perishable goods, minimising product deterioration and ensuring stock rotation on timestamps.

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Stock Reviews

‍Regular stock reviews help businesses track inventory levels, monitor depletion rates, and identify losses due to theft or damage. These reviews also provide insights into purchasing trends, allowing for better forecasting and replenishment planning.

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Just In Time (JIT)

‍JLT inventory management involves ordering stock only when needed, reducing storage costs and minimising waste. However, this method requires precise planning and is vulnerable to supply chain disruptions.

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Just In Case (JIC)

‍In contrast to JIT, the JIC approach ensures that a buffer stock is always available. While this method reduces the risk of stock outs, it requires additional storage space and can increase holding costs.

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Fixed-Time or Fixed-Level Reordering

‍This method involves reordering stock at predetermined intervals or when inventory falls below a specific threshold. It is useful to businesses with a steady demand, such as office supply companies that replenish stock monthly.

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Economic Order Quantity (EOQ)

‍EOQ is a mathematical formula that calculates the ideal stock level to balance supply and demand while minimising costs. This approach is best suited for businesses with stable purchasing patterns and consistent holding costs.
(the current EOQ formula is below, where Q = EOQ units, D = demand in units-annually, S = order cost-per order and H = holding costs-per unit, per year)

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Two-bin or Three-bin System

‍A two-bin system ensures continuous stock availability by using one bin for current orders and another for replenishment stock. A three-bin system introduces a third bin for replenishment to further streamline inventory management and reduce ordering costs. This approach is typically used for low-value items that can be brought in bulk and stored for long periods of time.

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Vendor Managed Inventory (VMI)

‍With VMI, suppliers take responsibility for managing stock levels based on the businesses order history and seasonal fluctuations. This method fosters a more collaborative supply chain relationship and reduces the burden of stock management on the warehouse.

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Contingency Planning

‍Contingency planning doesn't just refer to not having enough of a certain product in stock to meet demand, it covers all aspects of industry levels, such as :

• Sudden spikes in demand
• Delayed deliveries
• Limited storage space
• Supplier shortages

Having contingency plans ready to go help reduce bumps in the road. Having backup suppliers and flexible storage options can help businesses mitigate these risks.

How Optima Warehouse Solutions Can Help

Managing stock levels effectively requires the right tools and systems. Optima Warehouse Solutions provides a powerful warehouse management system designed to enhance stock control, accuracy, and efficiency.

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Optima WMS helps businesses by :

• Tracking inventory in real time, ensuring accurate FIFO stock movements, helping businesses prevent stock deterioration and maintain product quality.
• Automates stock reviews, providing detailed reports and alerts for low stock levels, allowing businesses to make data driven decisions efficiently.
• Managing JIC stock efficiently by optimising storage allocation and providing insights into demand trends to balance stock levels accurately.
• Automate reordering processes with configurable reorder points, ensuring that stock replenishment occurs at optimal times without manual intervention.
• Integrating EOQ calculations to help businesses determine the most cost-effective stock ordering strategy, reducing holding costs and improving efficiency.
• Supporting bin-level tracking, ensuring that stock movements align with predefined thresholds, reducing the risk of shortages and overstocking.
• Facilitating seamless VMI operations by integrating supplier data, enabling real-time stock visibility and automated replenishment.
• Providing predictive analytics and alerts to help businesses anticipate and manage stock disruptions effectively, ensuring continued operations.

Within Optima WMS, businesses can overcome inventory management challenges, reduce costs, and improve customer satisfaction.

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For more information on how Optima WMS can help streamline your warehouse operations, get in touch with Optima Warehouse Solutions today.

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