Suppose you stock winter jackets and other cold-weather apparel. Your warehouse likely sees a demand surge in winter but remains low-stocked during the summer, meaning your stock level fluctuates depending on seasonal demand.
Imagine if people started stocking for winter apparel in early or late summer; you’d have difficulty keeping up with this demand without a warehouse management system. While you struggle to meet this sudden demand, your competitors with a WMS are taking away your customers.
Don’t worry—there are several ways to maintain precise stock levels. We’ve compiled a list of strategies to help you control your stock and make the most of a WMS. Let’s get started.
What Are Optimal Stock Levels?
A stock level is the number of items of a specific product currently in storage. Maintaining optimal stock levels means having the exact amount to reach demand.
For example, a warehouse keeps enough winter apparel to meet customer demand without stockouts. Many businesses use stock control to avoid any disruptions in order fulfilment.
Stock control is a crucial aspect of order processing, and without it, you could disrupt your operation, reduce customer satisfaction and hinder your business growth. If done right, stock control is a game-changer for online retail, allowing you to meet customer demand and increase growth.
Why Is It Important?
Nowadays, people are giving up physical stores for online shopping. The great thing about eCommerce is that anyone can get online and place an order.
With so much demand, warehouses have become even busier, demanding better tools for order management. However, with more business comes more competition.
The main purpose behind stock control is to save you time and money while keeping your customers happy. Excess inventory might seem minor, but extra costs can slowly creep up and cause much damage.
Some warehouses overstock items in case of high demand, but this can be wasteful and eat a large chunk of your profits.
On the other hand, you might run out of stock and risk losing customers. To avoid such hiccups, stock level management can help you forecast demand so you’ll have the right amount of product on hand.
You will also build customer loyalty and improve client relationships as you’ll always have stock when needed. Some businesses might prefer to manage inventory manually, but this can be time-consuming and pose the risk of human error. Instead, invest in high-quality stock control software to gain critical insights into your inventory without errors.
How to Determine Optimal Stock Levels?
Warehouses can manage their stock by calculating the ideal inventory levels based on historical sales data. Once you have that baseline, you should order enough products to maintain the optimal level.
Often, your warehouse will need to stock products and follow data in real time to avoid any disruptions in the supply chain. Modern warehouses use inventory management software (WMS) to monitor stock levels, track sales, and manage incoming supplies.
You can also set automatic reorder points in a WMS to replenish items faster. Automatic reorder points are crucial here because they help you manage your stock more efficiently.
For example, a skincare company might stock 350 to 500 units of its bestselling moisturiser. When the stock level drops to 370, an automatic reorder point will immediately order more supplies.
Another thing to keep in mind is omnichannel fulfilment. Omnichannel fulfilment allows consumers to purchase products from multiple channels, including online retail websites, mobile apps, social campaigns and more.
All channels are linked to one inventory, so you won’t have to manage multiple stock levels. However, with multichannel fulfilment, warehouses should anticipate a bump in consumer demand. So, if we follow the previous example, your inventory level must be set at 600, and your adjusted reorder point should be 500.
4 Factors to Help You Determine Optimal Stock Levels
There are several factors that affect how you maintain your stock, some more important than others. While some warehouses have unique needs, there are some common ways to asses your stock levels. Here are 4 factors to look out for.
1. Demand Forecasting
The best way to prepare for customer demand is to get baseline data. Look at your stock trends to see which items are in high demand and which are slow-moving. Check historical sales data and consumer trend reports.
When you identify these products, you will also have information on the quantity to keep on hand. Demand forecasting will also help you allocate resources and finances more accurately.
While this isn’t a foolproof tip, you can guess how much product to keep. Always give yourself space for demand to go up or down, and you’ll make the most of this strategy.
You can create a forecast manually, but this can be time-consuming. Investing in a high-quality warehouse management system will give you all the necessary details for efficient stock control.
2. Inventory Lead Times
Production lead times are crucial for efficiency and for making informed decisions about stock levels. Once you determine the time it takes suppliers to manufacture products and the time it takes for them to reach your warehouse, you’ll know when to reorder.
Here are a few things to keep in mind for production lead times:
- Take note of public holidays that halt production
- Check how long it takes for items to leave the supplier and reach your warehouse
- How long it takes your workers to receive products and store them
- If workers are accurately recording items in the inventory
Human errors during inventory recording can often inflate or deflate stock levels. To avoid such issues, consider investing in a WMS system.
WMS are compatible with RFID sensors and barcodes, which ensure that all inventory is recorded accurately. With these features, you’ll always have the correct stock figure to avoid over- or understocking.
3. Maintaining Stock with Perishable Products
If your products have a shelf life, get them out immediately. Expired products sitting in the warehouse will inflate your stock numbers while leaving you with unusable products.
Fixing such problems can be time-consuming and costly. Instead, create strategies to ensure perishable items move steadily out of the warehouse well before their best-before date. This way, you won’t lose money on ruined products, and your customers will have enough time to enjoy their items.
One great tip is to create reminders for each product category so you know when to send them out. A reminder system will also keep you on track on when to shift stock before the products expire.
Another helpful strategy is to check the best-by date as you pack each order. If you’re packing items in a bundle, that doesn’t mean all the products have the same best-before date, so note this to avoid a bad customer experience.
4. Safety Stock
Safety stock is extra inventory that businesses set aside for emergencies. These include sudden demand surges or delays in manufacturers’ supplies.
With safety stock on hand, you’ll ensure that your inventory stays at an optimal level. But you need to get the number right to avoid any hiccups.
To know the correct amount for safety stock, look at:
- Maximum daily output
- Average daily output
- Maximum lead time
- Average lead time
4 Ways To Maintain Optimal Stock Levels
Maintaining stock is crucial in a busy warehouse. Inventory control strategies are the best way to ensure accurate order fulfilment and keep customers happy.
There are several ways to go about this, but we’ve compiled a list of 4 strategies to help you maintain the optimal inventory level.
1. Use An Inventory Tracking Software
One of the quickest and easiest ways of maintaining your stock is by using a WMS. A WMS system is designed to manage all major functions in a warehouse.
You can add all your stored inventory here, assign categories, track its movement, and ensure it is shipped on time. This highly innovative tool is fundamental for any business looking to streamline its supply chain.
With inventory management software, you can access key insights that make forecasting customer demand easy. A WMS system also helps you manage workload and assign tasks according to a worker’s skills.
Ultimately, your WMS should centralise all functions in the warehouse. Once you get started with this software, you’ll have a future-proof solution to increase your warehouse’s longevity. Canary7 offers a fully responsive and robust warehouse management system that helps you take your business to the next level.
2. Set Clear Reorder Points
Setting accurate reorder points is a great way to ensure you always have enough stock and avoid losing a customer. If you don’t set up a reorder point, you could cause a significant disruption in your workflow.
If this happens multiple times, you risk losing long-time buyers and tarnishing your brand’s reputation. The great news is that you can avoid this problem by simply setting up a reorder point.
Check your historical inventory date and forecast demand for reordering. Once you have your insights, you’ll know how much to order and when. Then, use the inventory management system to create an automatic reorder point notification so you can stay on top of your stock levels.
Additionally, consider your lead times when setting up the point, as this will reduce time constraints.
3. JIT Method
In JIT or the Just In Time method, you only order the number of items you need, exactly when you need them, maintaining steady rotation in your inventory. With this method, the volume of your inventory more or less matches the number of orders fulfilled.
The key philosophy for the JIT method is being able to meet customers’ demands but also being able to quickly order more stock for the next set of orders. This stock control strategy was created to increase efficiency, cut inventory holding costs, and reduce waste by purchasing only products that were sure to sell.
However, several factors, including a streamlined supply chain system and fast delivery, are needed to maintain this method. The JIT method can also fail due to several outside disruptions, such as sudden demand surges, supplier unreliability and natural disasters that can halt supply chains.
Such problems can create costly hiccups, compromising product quality and decreasing customer satisfaction.
Despite its potential pitfalls, the JIT method is an excellent way of controlling your stock and making sure it stays in rotation. This method reduces storage costs, enhances operational efficiency, reduces waste, and improves your business finances.
4. Conduct An Inventory Audit
Even though warehouse and inventory audits are time-consuming, they are extremely helpful for determining which areas of your warehouse need more work.
An inventory audit will identify any low productivity gaps in your supply chain. With this information, you can take proactive steps to optimise your inventory and create a smoother workflow.
Conducting an inventory audit manually is daunting as you have to use large amounts of data with spreadsheets. Fortunately, you can speed up this task with a quality WMS system. A WMS will digitise your inventory and provide accurate data.
How Canary7 Can Help You Maintain Precise Stock Levels
Modern warehouses require modern tools, and Canary7’s WMS is a great option. Our WMS is designed with innovative tools to handle daily tasks and more complex problems. Here are some great features of Canary7’s WMS:
- Better Inventory Accuracy: Our WMS maintains precise control over your stock levels by tracking real-time movement.
- Improved Productivity and Efficiency: Canary7’s WMS simplifies warehouse tasks and provides tools to create a smooth workflow.
- Real-time Reporting and Visibility: Our WMS provides access to real-time reporting with accurate details and measurable KPIs. With this level of visibility, you can make informed decisions and optimise your inventory.
- Scalability: As your business grows, Canary7’s WMS will scale up with you. Our scalable WMS will be a future-proof solution for your warehousing needs.
Optimise Your Inventory With Canary7
Get started with Canary7 today to simplify inventory management. Our user-friendly WMS software is designed to improve organisation and visibility.
Our software is designed to give you a 360-degree view of your inventory with accurate insights to make informed decisions.
With all these tools, you can improve efficiency while cultivating your brand. So don’t wait; get started with Canary7 today!
Mishal Khan
Author
UPDATED ON: 8th May 2024
Mishal is a dedicated copywriter and content writer with experience across various niches. Currently, Mishal is focused on writing guides and other compelling blogs on warehouse management, logistics and more, crafting engaging and informative content to help businesses understand and master their supply chain. Passionate about delivering quality content, Mishal aims to make complex topics accessible and enjoyable for all readers.
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