It’s often compared to a balancing act. Any good stock management system has to satisfy several competing demands – matching costs against revenue to ultimately produce a profit.
Essentials of Stock Management Systems
You can break stock management into three categories of factors. How well you can balance all three determines your potential profits from selling.
These categories are:
We recently produced a detailed series on inventory management. (While we were doing that, a great example of what happens when you don’t have good inventory management happened to Hasbro – a company easily big enough to know better).
A good stock control system isn’t just about purchasing decisions. It should give your warehouse team a clear picture of what they’re responsible for at a glance. It should make it easy to track shrinkage (items not sold but not available for sale – missing, damaged, out of date or stolen) and identify dead stock.
And it should make it easy to monitor, track, and identify shifts in customer demand. The quicker you can respond to a spike in demand, the more items you can sell; the faster you identify a fall in demand, the less you’ll lose buying stock that won’t sell.
What are the costs of buying in new stock? What sizes of order can you place? Are there discounts for purchasing in bulk? Can you take advantage of them? Given shrinkage rates, would they still work out cheaper than buying lower quantities, more often, without a discount?
Would a bundle deal be profitable? How many items do you have to sell to turn a profit after operational costs are paid? Can you afford to stock your weaker lines, or should that storage space be dedicated to something more popular?
All of these are primarily financial questions which have to be answered for effective stock management.
There’s a good argument that eCommerce stock management doesn’t end until the customer has received the product and not applied for a refund or replacement. Your returns process is part of stock management.
Not only that, but being able to track orders by customer is useful to your warehouse team. Making that information available to them is simplest if your CRM is accessible through your stock management system. (Or, of course, if they’re both part of a larger order management system.)
At this point, we’re looking at modern computerised stock control as an essential.