Analyzing your business regularly is quite a crucial thing because then you can realize whether your business is heading towards your desired path of success. And stock management is one of the various necessary things for a business. Because usually, you have to face these two questions if you like to do business:
1. Does your business consistently have all the necessary products your customers need?
2. Are you keeping products online and also in your store?
If your answers to these two questions are “no”, you need to understand that your business’s stock management is not up to the mark. That’s why you need to know- what is stock management? How can you keep track of your shop items quite easily? Then let’s know it in detail from this article.
What is Stock Management?
Stock management refers to the process of determining and properly managing how much stock a company should keep for a certain period. It entails all processes regarding ordering, tracking, managing or controlling, and storing stocks.
Stock management involves the following things:
- Reviewing the state of your stocks.
- Noticing the fluctuations in the quantities or numbers of your stocks.
- Calculating the costs of your items.
- Understanding the customer demand for the stock.
- Calculating the costs of storing, managing, and shipping.
The right stock management makes meeting customer needs possible by not wasting money on excessive stock. Stock management is vital for your e-commerce business for various reasons. Those are:
- It ensures selling the products to customers when they want to purchase them.
- It prevents excess stock that causes wastage of money and logistical and storage-related issues.
- It plays an important role in enhancing customer satisfaction by ensuring the stock supply is on time and in the right quantity.
The Relation Between Stock Management and Inventory Management
Many people think that stock management and inventory are the same things. But actually, stock management is just a part of your inventory management and control process. Stock management has a close relation with inventory management because stock management involves tracking inventory and managing your stock in the business.
You track the condition, demand, and quality of your stock or finished goods that are ready to take place on the shelves of stores, with stock management.
Conversely, inventory management entails the whole process of monitoring and keeping track of inventory, stock, customer demand, demand fulfillment, supplier data, and future planning. Inventory management is related to stock management because it is liable for tracking the stocks that are kept in stores. It not only involves products for sale but also those that are reordered, out of stock, or on sale.
Classification of Stock and Inventory
Now, let’s know about the different types of stocks and inventories. The following ones fall under various types of stocks and inventories.:
- Raw material inventories or items are those you use for manufacturing products.
- In-transit goods are those goods that are no longer in the warehouse and are on the way to their final destination.
- Unfinished products are those that work in progress and are not ready for sale.
- Cycle inventories are those products that are sent to some business from the manufacturer or supplier and then are sold directly to the customers.
- MRO goods or maintenance, repair, and operating supplies that help in the manufacturing process.
- Anticipation inventories are extra products that are kept ready in an anticipation of a rise in sales.
- Buffer inventories or safety stocks give security when you need more inventories or if an unwanted occurrence takes place.
- Decoupling inventories are parts, goods, or supplies that you keep aside if you anticipate any slowdown or halt in production.
- Finished products or stocks- these are usually stored in any warehouse until sent or sold to customers.
This classification will help you in the right stock management because you will understand which of these will fall under the same category. For instance, you will manage your finished products or stocks differently from your raw materials.
Way to Keep Track of Your Shop Items
If you keep track of your shop items annually, it will help in stock management in the best way. You’ll also need to implement a continuous system to track the stocks you have bought and sold. An effective tracking system for your stock will help you decide when you need to reorder the stock.
Keeping track of your shop items which is generally known as stocktaking, entails preparing a list of all the items you have. Ensure that you can track each of your stocks through the following things:
- Unique item number
- Sales price
- Storage location
- Costs
- Stock Number
- Quantity
- Applicable tax
- Point-of-sale details or Number of supplies
Stocktaking helps you identify stolen, spoiled, defective, and lost items. You can often write these items as a loss against the cost of goods sold for accounting purposes. You will be legally liable for stocktaking once annually based on your business size and stock. Know well about the legal obligations of stocktaking so that you don’t fall under any legal issues.
Include the outcomes of stocktaking in your business’s record keeping.
Manual or Hand-Operated Stock Management
Manual or hand-operated stock management is ideal for businesses that have a small amount of stock. Hand-operated stock management can include the following:
A separate stock copy or book to keep accounts of your bought and sold items.
A re-order system based on your stock copy or book.
Codes and labels of your every stock along with each item’s quality, when you’ve received that, and location of that.
Computer-Based or Computerized Stock Management
Consider using a simple computer-based or computerized stock management program. These computer programs or software can track the stocks you sell and order, and store the costs. The software can also include a POS or point-of-sale machine and scanner with it. Some big cargo companies can also provide a detailed web-based system to track shipments.
The stock management or control programs can provide some special techniques for stock management and can help to solve certain stock management-related issues too. If you want you can get a program certain for the stock you are holding or the sector or industry in which you are doing business.
HishabPati
is one such software that you can use on your mobile as an app and on your computer, laptop, or tab through a web browser. This is an affordable app that will help in your stock management totally automatically and flawlessly.
How Will You Understand that Your Business Has Stock Management-Related Issues?
Think about the following things for a while to understand whether your business has stock-related issues:
- Do your customers regularly order such products the stock of which is over?
- Do you have a congested warehouse with less inventory turnover where there is no place to store stocks?
- Do you have to write off a large quantity of unsold, dead stock, or spoiled stock most of the time?
- Do you consider differentiating between the worst-sold stock and the best-sold stock time-consuming and difficult?
- Do you have problems distributing stocks among various channels?
- Are you paying the suppliers more money for mistaking the stock re-ordering points?
If any of these questions’ answer is “Yes”, you need to understand that your business probably has stock management-related problems.
There are some ways to recognize stock issues in your e-commerce business, one among them is to check your level of inventory at regular intervals and compare that to your sales. If you see a consistent distinction between your inventory level and your sales, this can be a sign that your business has stock issues. Generally, e-commerce platforms contain a built-in inventory-management feature and effectiveness that will help you track your inventory calculations and recognize stock issues.
Stock Controlling Procedure
Different procedures are there for stock controlling those help you decide when, what, and in which quantity or number you will order. You can apply any of these or if you have various kinds of stocks apply to mix two or more of these procedures. You can use the following procedures:
Stock Reviewing- You will review stock regularly. You will perform an order during each review so that your stock goes back to a predetermined level.
Minimum Stock Level- Under this method, you recognize a minimum stock level and if your stock reaches that point, you're-order. This level is called the re-order level.
JIT or Just-in-Time- This method tries to minimize cost by taking stock to a minimum level. The items are supplied when they are needed and are used then immediately. Here, a risk of stock getting out of stock exists, so you need to ensure that your suppliers supply exactly when you want.
EOQ or Economic Order Quantity- This is an ideal formula to have a balance between keeping too much stock and too little stock. This is quite a difficult calculation, so using stock management or controlling software will be easy for you.
Re-order Lead Time- It calculates the time between performing and receiving an order.
Batch Control- Under this method, stock manufacturing takes place in various batches. You need to ensure that you have a sufficient quantity of stock to meet your requirement until the next batch begins.
If you can predict your demand, you can order a definite quantity or after a certain interval during making an order such as weekly or monthly. As you are making a standing order, consider reviewing the price and quantities.
FIFO or First in First out This procedure ensures that your perishable stocks are used effectively so that they are not spoiled. Stocks are recognized according to the date on which you have received them and pass through each stage of production in strict order.
Final Words
Now, you are certainly clear about- what is stock management? How can you keep track of your shop items quite easily? So, effectively manage the stocks of your business effectively without any delay so that you won’t face any stock-related issues. Best of luck!
