Managing your money
Get Started: Best Practice in Managing Stock
When it comes to effectively managing your stock, it boils down to a lot more than having enough products on your shelves. As a business owner, you’ll know that it’s all about having the right amount of products at the right time, with as little ‘dead stock’ as possible, which is not as easy as it sounds.
So why is this so important? For a start it will save you money by helping to reduce the amount of stock that is perishable, out of season, or that can no longer be sold. And it will also affect other important aspects of your business such as cash flow and customer satisfaction.
So with that in mind, here are a few tips on how you can manage your stock:
A large part of managing suppliers comes down to relationship management; as communicating effectively with your suppliers can put you in a better position to negotiate your terms. You should always let them know well in advance when you expect to be more busy than usual or if you’re going to have a quiet month so that they can better prepare for your orders.
By maintaining this close communication, you are effectively creating a two-way relationship which could be beneficial for both parties. For example, your supplier could be more inclined to let you know when they have special items in stock, give you more visibility when it comes to any delays with your orders, restock at short notice, and also be more flexible when it comes to minimum order quantities and returning stock.
And while it’s easy to get carried away with bulk-buy discounts and deals offered by your supplier, always make sure you’re able to sell at a profit and in a reasonable timeframe. Negotiating for smaller and more frequent deliveries can also help you control cash flow.
Forecasting is essential when it comes to managing your stock and it all lies in predicting how much supply you’ll need and when.
“Holding big stocks is very old school,” argues Simon Monaghan, a consultant from the Business Doctors network of SME experts. "The more you hold, the more space is required, which leads to bigger overheads. Stock really is dead money. Keep it to a minimum.”
One of the best ways to do is by looking at your historic sales data, which can also support you in stocking to the demand of your customers. Things to look out for include spikes and trends at certain times of the month or year - some of these could be affected by holidays and special events. You can also look at other less obvious spikes such as a rise in sales after payday or industry trends that are influencing your customers.
The more data that you have, the more you can make accurate predictions to determine when you need to order your stock, how much you need to bring in and the sorts of products you need to consider. If you’ve just started out and don’t have any data yet then it could be worth taking a look at the activity of some of your competitors.
All businesses will be affected by seasonal fluctuations but this doesn’t need to be a bad thing. In fact, has your sales cycle changes it can be an opportune time to run promotions and tap into the target market while taking advantage of seasonal themes.
It’s important to be open minded during these times, especially when it comes to taking control of stock; as you may need to respond to changes in demand which could mean restocking items more often or pulling items that aren’t selling well.
Planning well in advance is also crucial. Hugh Williams, managing director of Hughenden Consulting, says: “The key to planning for any type of seasonality is to allow a sufficiently long window of at least 12 to 18 months. People initially balk at this because they confuse demand planning with forecasting orders.”
Keeping track of your inventory is an ongoing process so you’ll want to make sure you’re on top of it at all times. If you have an EPoS system in place, you’ll be able to set up alerts when stock is low, automate purchase orders and keep track of customer purchase history.
Other things worth considering are adjusting stock levels when items get returned, and making a note of what has sold the most, what has made the most profit and what has not sold well. This will all help you when setting out your shop floor and planning for future restocks.
Investing in inventory management software can also save you a lot of time managing inventory, and save money in the long run too. The software can help reduce errors associated with manual stock taking, automate time consuming tasks and incorporate cloud-based solutions so that you can update information wherever you are and at any time.
Managing stock can seem like a juggling act at times, but with the right planning, forecasting and tools in place, you’ll be good to go in no time!