- 1 Tips for Effective Stock Management
- 1.1 1. Set minimum stock level
- 1.2 2. If You Can, Use the First In, First Out (FIFO) Method
- 1.3 3. Have a good relationship with your supplier
- 1.4 4. Have a contingency plan
- 1.5 5. The importance of accurate forecasting
- 1.6 6. Quality control is everything
- 1.7 7. Use accounting software to simplify stock management
Now that you know the importance of good stock management, stock types, and some stock management methods. We have some tips for effective stock management:
1. Set minimum stock level
The first important thing to do is to set a “minimum stock level” for each of your products. This is the lowest quantity that should be available at all times so when the quantity drops below this predefined level, you know it’s time to order more!
The minimum stock level varies for different products and it depends on your business and the demand for your products.
To create a predefined level, you will need to do your research and make a decision regarding the best level for your business.
Note that overtime conditions are subject to change so remember to keep updating and check levels several times throughout the year to account for any changes.
2. If You Can, Use the First In, First Out (FIFO) Method
‘FIFO‘ is a stock management rule that many businesses follow. This means that what is obtained first (first-in) must be sold first (first-out).
This is especially useful for perishable items, so stock doesn’t end up being damaged, worn, or worn out.
To implement this system effectively, you need to put your new product at the back and make sure your existing product stays at the front for easy access.
3. Have a good relationship with your supplier
Good stock management requires your business to be able to adapt quickly to changes.
If you have a small business, things change rapidly from day to day and there may be challenges getting in the way that require last minute restocking or fast delivery.
Maintaining strong relationships with your suppliers will help you in the long run.
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They will be more willing to help solve restocking problems, ship higher quality products, negotiate minimum order quantities and potentially lower prices.
To have good supplier relationships, you need clear two-way communication.
Notify suppliers whenever something is expected to change (perhaps an unexpected increase in sales) so they can adjust their production accordingly.
In return, they should also notify you if a delivery is behind schedule so you can take action to prepare for stock shortages.
Try not to tell them last minute, if possible, as that just adds extra pressure and tension on both sides.
4. Have a contingency plan
Contingency plans are often used for risk management to prepare for possible future scenarios or events.
There are many issues that can arise regarding stock management:
- An unexpected increase in sales and you’re out of stock
- Running out of storage space
- Miscalculated the stock causing not enough products to sell
- Lack of cash flow to pay for stock
- The supplier is out of stock and you have an order to fulfill
- Stock delivery delay
It is difficult to predict when these problems will arise, so it is safer to prepare for potential risks in advance.
Think about how you will react, what steps need to be taken to solve the problem and how to minimize the impact on other areas of your business operations.
Having a pre-planned response strategy will save you time and money when a crisis does occur.
5. The importance of accurate forecasting
The most important part and the backbone of stock management is forecasting demand accurately.
You don’t want to have too much stock, but you also don’t want to have too little. This is very difficult to do because there are so many factors that can get in the way.
You can never get an exact match, but you should try to get as close as possible.
Here are some things you should consider when accurately predicting demand:
- Market trends
- Compare with sales during the same time last year
- Annual growth rate
- Seasonal factor
- Upcoming promotions
- Advertising and marketing spending
- Political factors
- Social trends
- Tech trends
6. Quality control is everything
Always remember to check the quality of your stock! This can be as simple as having your staff perform a quick quality check during a stock audit for signs of damage.
Also, double check your products to see if they are properly labeled to prevent mistakes made during stock monitoring and tracking.
7. Use accounting software to simplify stock management
With so many accounting software available today, look for one that features real-time sales reports and stock analysis. This means that you can access your data anytime and anywhere.
Kledo’s accounting software allows you to do this.
Not only that, Kledo can also be integrated into your POS system, so every time you make a sale, the appropriate stock level will be deducted from your existing stock data.
You will also receive a daily stock report at the end of each day, and get an automatic message whenever you run out of stock. What’s even better is that you can set your minimum stock level.
With Kledo, you will be able to:
- Reduce costs and improve cash flow
- Track your stock in real-time
- Access your stock data and analysis on any device, anytime and anywhere
- Estimate demand accurately to help with inventory planning
- Avoid product shortage
- Prevent excessive stock storage
- Connect directly to your point-of-sale system
- Track and monitor stock quickly with barcode scanning and dedicated SKUs (stock storage units) for each individual item
- Manage and transfer stock across multiple warehouse locations