Stock-taking: A key aspect you may be doing all wrong

Statistical control of stocks in your organization is one aspect that can determine the fate of your entire supply chain. For that reason, pay attention and learn everything you can. First, it must be said that based on the chronological records of the movements per product in your warehouse, you can calculate the frequency of use, and this, subsequently, will allow you to know the likely periodicity of handling the existing articles in your stock. What is the purpose of this? By doing this, you can constantly monitor that the supply of your warehouse from your production plant, is sufficient and not excessive in all the materials you use.

Now, you may be aware that the optimal level of inventories is the one that is kept between a minimum stock limit. However, this limit must be adequate to ensure the continuity of operations and a maximum determined by the volume of sales, as well as by productive capacity, space constraints, and other expenses which come as a consequence of the physical handling of goods. To this extent, the most appropriate investment you can make when thinking of inventories has to do with observing the prevailing conditions in the market. These conditions are based, above all, on the results produced by the marketing studies that are done in this respect.

Another vitally important issue regarding stock control is related to your suppliers’ restocking programs. What exactly is this? Such programs are really a schedule of your suppliers regarding the material needed to produce what you sell and distribute. These programs are based on the production requirements of your company, as well as your sales and production budgets (obviously) that you have set for each period.

Material requirements must be recorded chronologically, just like the supplier who is responsible for making the delivery in the necessary period for your entire productive operations. The reason for this is that a warehouse has clear limits of space, and, therefore, you cannot deal with two or more vendors at the same time. The consequence of this is that it is necessary to make a schedule that should include not only the day of delivery, but the time, and the exact amount of merchandise that should be stored in the least possible amount of time.

Read also: Learn how to improve the warehousing of your business, by David Kiger

One issue that many small businesses take for granted, not knowing that it is an important source of problems, is the definition (or absence of) cyclical demands of production. This is, in a nutshell, the continuous and periodic use of material that must be implemented through very strict measures to allow a timely supply of raw material. The purchasing department of your company must obtain the goods and services needed for the production of your own goods, and, moreover, arrange the deliveries according to the periodical demand that is required for the continuity of the processing operations. Likewise, you can recommend new products and cheaper amounts for your company’s production department. Keep in mind that the purchasing department will need to establish periodic delivery contracts with suppliers and that suppliers must fulfill your deliveries as accurately as possible.

Communication with the purchasing department should be as fluid and efficient as possible to achieve an excellent stock control. Reports are the basic means of communication here. For this reason, it is advisable to be up to date on the latest Big Data technology: This not only saves time, problems, and, therefore, money, but also means accurate, constant, and rapid information. There are awesome software tools that can even collect data about any movement in your warehouse automatically, and send it to you every time you request it.

store_product_storage_logistics_stock_supply chain
Image courtesy of Fancycrave at Pexels.com

Any executive decision-making process is based on the information available, which is derived from the operations of the organization, or, failing that, the budgeting based on the experience of past events, which acquire significant importance when they are embodied in reports used by third parties.

Reports are research instruments. These provide essential elements of judgment about the situations that occur daily, those that will certainly happen, or those that happened at some point in the past. Without this information, you simply cannot make decisions at critical times, so take care of the source and control of the information of all the movements of this phase of the supply chain (and not only of this one.)

At a minimum, a report from the purchasing department (or a software monitored by this department that fulfills these communication functions,) must contain at least the following requirements. First, what have been the changes in price and trends? Here you must include everything that has happened in the past, and the next predictions based on the information collected and processed. Secondly, the report should specify the delivery times of the supplier, according to its experience, for all items to be delivered. Finally, the report should contain information about cost reductions, and statistics about how much money has been saved since the last time.

I hope this information has been useful for you.

Recommended: Stocktaking made easy

* Featured Image courtesy of Walt Stoneburner at Flickr.com

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