In today’s fast-paced eCommerce world, managing stock levels effectively can make or break your business. Poor stock control can lead to either surplus inventory or stockouts, both of which can damage profits and customer satisfaction. So, how do you maintain optimal stock levels to meet customer demand? Enter the Warehouse Management System, a game-changer for modern warehouses.
With fluctuating demand, especially during peak seasons, ensuring you always have the right amount of stock is crucial. In this guide, we’ll explore strategies to help you optimise stock levels and boost your efficiency using a Warehouse Management System (WMS).
What Are Optimal Stock Levels?
Optimal stock levels refer to the amount of inventory you need to meet customer demand without understocking or overstocking. Keeping stock at an optimal level ensures you have the right products available when needed, reducing excess storage costs and avoiding missed sales opportunities.
For example, a warehouse handling winter jackets needs enough stock to meet customer demand in colder months. However, overstocking these items in the summer could lead to wasted resources. On the other hand, running out of jackets during a winter rush could result in lost sales and unhappy customers.
Maintaining optimal stock levels through proper inventory management allows businesses to ensure seamless order fulfilment, enhance customer satisfaction, and drive growth.
Why Is Stock Control Important?
With the growing trend of online shopping, warehouses are busier than ever. By 2024, global eCommerce sales are expected to surpass $7 trillion, with an increasing demand for faster, more efficient fulfilment. This surge puts pressure on warehouses to manage their inventory with greater accuracy and efficiency. As competition grows, businesses need to adopt better stock management practices to stay ahead.
Effective inventory management helps you save time and money by preventing overstocking and understocking. Excess inventory might seem harmless, but the storage costs and potential losses from unsold stock can damage your bottom line. On the other hand, running out of stock can result in lost customers who turn to your competitors.
Using a Warehouse Management Software (WMS) to monitor stock levels in real time enables you to forecast demand, automate reordering, and keep your customers happy with consistently available products. For businesses that still rely on manual inventory management, the risk of human error increases, making the switch to Best Inventory Management Software crucial.
How to Determine Optimal Stock Levels?
Determining optimal stock levels involves using historical sales data and demand forecasting. Here are some key steps to follow:
- Analyse historical data: Look at past sales trends to identify which products are in high demand during specific seasons.
- Set automatic reorder points: A WMS can set automatic reorder points to ensure you never run out of stock. For example, if you stock 500 units of a popular moisturiser and the level drops to 370, an automatic reorder point can trigger a new order.
- Track real-time data: Use a Warehouse Management Software to track stock levels in real time, allowing for immediate adjustments to prevent stockouts or overstocking.
By following these practices, you can maintain optimal stock levels, avoid supply chain disruptions, and ensure smooth operations.
The Role of a WMS in Omnichannel Fulfilment
In today’s retail landscape, customers expect seamless experiences across various channels. With eCommerce Warehouse Management and omni channel fulfilment, products are sold through multiple platforms such as online stores, mobile apps, and social media. Managing stock across these channels can be challenging, but a WMS helps you link all channels to a single inventory.
For example, a business might sell winter apparel both online and in-store. A Warehouse Management Software can ensure that inventory levels are updated across all platforms, so stock levels are synchronised in real time. This way, customers can make purchases without worrying about stockouts, and you can manage multiple channels efficiently.
4 Factors to Help You Determine Optimal Stock Levels
Several factors influence your ability to maintain optimal stock levels. Let’s explore four key considerations.
1. Demand Forecasting
Accurately forecasting demand is one of the most important steps in optimising stock levels. Start by reviewing your historical sales data and identifying trends. For example, if you sell cold-weather gear, you’ll likely see spikes in sales during the winter months and dips during summer.
Here’s what to focus on:
- Track historical trends: Look at previous sales data to see which items sell fast and which ones lag.
- Monitor market trends: Consumer demand can shift based on broader market trends, so stay informed about changing preferences.
- Account for seasonality: Certain products are more popular during specific times of the year, so always adjust your stock based on seasonality.
While forecasting isn’t foolproof, investing in a Warehouse Management System with forecasting capabilities will provide real-time insights, making stock control more efficient.
2. Inventory Lead Times
Understanding inventory lead times—the time it takes for stock to be replenished—is vital to maintaining optimal stock levels. If you don’t factor in lead times, you risk stockouts during crucial periods.
Here’s how to manage lead times effectively:
- Account for holidays: Factor in public holidays that may delay production.
- Track supplier lead times: Know how long it takes for your suppliers to process and deliver orders.
- Monitor receiving times: Ensure your workers efficiently receive and record inventory to avoid delays.
Implementing a Warehouse Management System with barcode scanning or RFID technology can help eliminate human errors in inventory recording and ensure accurate stock levels.
3. Managing Perishable Products
If your warehouse stores perishable products, maintaining optimal stock levels is even more critical. Expired or spoiled goods can inflate stock numbers and lead to significant losses.
Follow these strategies for managing perishable stock:
- Set reminders: Use a WMS to set expiration reminders, ensuring products move out before they spoil.
- Check expiration dates: Always verify the expiration dates while packing orders, especially when bundling items.
- First-in, first-out (FIFO): Implement FIFO procedures to ensure older stock is sold first.
By using these strategies, you can minimise waste and maintain accurate stock levels for perishable items.
4. Safety Stock
Safety stock refers to extra inventory set aside to cover unforeseen circumstances, such as sudden demand surges or supply chain delays. While having safety stock is essential, maintaining the right amount is key to avoiding overstocking or understocking.
To calculate your safety stock, focus on:
- Maximum and average daily sales
- Maximum and average lead times
For example, if a product’s maximum daily sales are 200 units and the maximum lead time is 10 days, keeping 2,000 units in safety stock ensures you’re covered during unexpected demand spikes.
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 Inventory Tracking Software for Real-Time Control
To keep up with today’s dynamic demand, leveraging modern tools is essential. Inventory tracking software, such as a Warehouse Management System (WMS), simplifies the task of managing stock levels while reducing human error. A WMS system manages all key warehouse functions, allowing you to centralise your inventory, assign categories, track movement, and ensure timely shipping.
By using inventory management software, you gain access to key insights that help forecast customer demand more accurately. A WMS also improves workload management by assigning tasks based on a worker’s skills, ensuring efficiency across all operations.
Ultimately, a Warehouse Management System should centralise all warehouse functions, offering a future-proof solution to improve your warehouse’s longevity. Canary7’s Warehouse Management System offers a fully responsive and robust system designed to take your business to the next level.
2. Set Accurate Reorder Points to Avoid Stockouts
One of the best ways to ensure you never run out of stock and lose a customer is by setting accurate reorder points. Without them, you risk significant workflow disruptions, which could tarnish your brand’s reputation and drive customers to your competitors.
Reorder points are calculated using historical inventory data and demand forecasting. With this information, you’ll know how much to order and when to reorder it. Once you have those insights, use your inventory management system to set up automatic reorder point notifications, so you can stay on top of your stock levels.
Be sure to consider lead times when setting reorder points, as this will help reduce any time constraints in your fulfilment process.
3. Adopt the Just-In-Time (JIT) Method for Lean Inventory
The Just-In-Time (JIT) method allows you to order exactly what you need, precisely when you need it. This method helps maintain a steady rotation of inventory, ensuring that stock levels match the volume of orders fulfilled.
The JIT philosophy focuses on meeting customer demand without overstocking. It increases efficiency, reduces inventory holding costs, and minimises waste. However, to succeed with JIT, you need a streamlined supply chain and reliable delivery systems. External factors such as sudden demand surges or supplier issues can disrupt the JIT method, potentially leading to stockouts or compromised product quality.
Despite these challenges, JIT is an excellent strategy for controlling stock and ensuring consistent turnover. This method cuts down on storage costs, improves operational efficiency, and strengthens your financial performance.
4. Conduct Regular Inventory Audits to Optimise Efficiency
Inventory audits are essential for identifying gaps in your supply chain that may affect productivity. While manual audits can be time-consuming and require working through large amounts of data, using a Warehouse Management System can streamline this process. A WMS digitises your inventory records, providing accurate and actionable data in real-time.
Regular audits help you spot inefficiencies, optimise your stock levels, and create a smoother workflow. With audit data, you can take proactive steps to address areas of low productivity and ensure your warehouse is functioning at its best.
How Canary7 Can Help You Maintain Precise Stock Levels?
In a modern warehouse, you need the right tools to manage both day-to-day tasks and more complex operations. Canary7’s Warehouse Management System is designed with innovative features to help you achieve precision and efficiency in every aspect of your operations. Here’s how Canary7’s WMS can take your warehouse management to the next level:
1. Better Inventory Accuracy
Canary7’s WMS eliminates stock discrepancies with real-time tracking and automated updates. This ensures your inventory data is always accurate, preventing costly stockouts or overstocking. By keeping a close eye on your stock levels, you’ll be able to forecast demand with confidence.
2. Improved Productivity and Efficiency
Our Warehouse Management System streamlines operations by automating routine tasks such as inventory counting, stock replenishment, and order processing. This frees up your team to focus on higher-value tasks, boosting productivity and efficiency across the board.
3. Real-Time Reporting and Visibility
Canary7’s WMS provides real-time reporting with detailed, measurable KPIs. This gives you complete visibility over your stock and operations, helping you make informed decisions quickly. With this level of insight, you’ll be better equipped to optimise stock levels and reduce inefficiencies.
4. Scalability for Growing Businesses
As your business expands, Canary7’s Warehouse Management System will scale with you. Whether you’re growing your product line or expanding into new markets, Canary7’s WMS provides a future-proof solution that adapts to your changing needs.
Conclusion: Get Started with Canary7 Today
Managing inventory in a busy warehouse can be challenging, but with the right tools, it doesn’t have to be. Canary7’s Warehouse Management System is designed to simplify inventory management, improve accuracy, and boost operational efficiency. With our WMS, you’ll gain real-time visibility into your stock levels, optimise your workflows, and scale your operations seamlessly as your business grows.
Ready to take control of your inventory? Don’t wait—get started with Canary7 today and transform your warehouse management with a system that’s built for success. Contact us now to schedule a demo and see how our Warehouse Management System can help you achieve optimal stock levels and more!
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.
Subscribe to get latest posts straight in your inbox.