Poor inventory restocking procedures might have a negative influence on your shop’s bottom line, from missing sales to overspending on logistics expenses.
You might face several inventory management problems if you don’t apply stock control methods and enhance inventory accuracy.
The following are the most prevalent inventory restocking difficulties.
When you don’t place orders on time, you run the danger of stockouts. Stockout costs can be significant, especially when they occur frequently, resulting in lost consumers, canceled orders, and even bad online customer feedback.
Calculating how much safety stock makes sense to keep is one of the many strategies for avoiding stockouts. You’ll be prepared if there is a sudden increase in demand by having more inventory on hand. You should also consider supply chain concerns, as importing from overseas entails its own set of difficulties (e.g., customs clearance at ports).
All you need to know to calculate safety stock accurately is the following information:
- Maximum daily usage
- Maximum lead time
- Average daily usage
- Average lead time
Then, to figure out how much of a product you’ll have on hand at any given moment, use the following equation:
All of this monitoring and calculation has two goals: to optimize product levels and to bring all systems in sync, both within your company as well as with other businesses.
Overstocking is as harmful as dealing with stock-outs in some cases. You may be able to meet demand, but it can drain resources and your budget, reducing profit margins. You could be wasting money and putting your business at risk by storing inventory incorrectly. Dead stock is inventory that becomes unsellable (whether things go out of season or past their expiration date).
You’ll also have too much money tied up in inventory, which will hinder your company’s cash flow and ability to expand.
Increased order fulfillment costs
Inventory management is one of the most important components of your supply chain. You may not be aware that inadequate inventory management can also result in higher fulfillment costs, as restocking inventory, receiving, storing, selecting, packing, and shipping are all influenced by how quickly you replenish your stock.
Let’s assume a customer places an order with your company, but one of the items is out of stock. This may lead to a split shipment, which is when one item is delivered before the other or from a different location. With a split shipment, you’ll spend more on shipping since there are two separate shipments (and it doesn’t make for a great customer experience).
If you have inventory in several locations, you’ll need to know where to keep specific SKUs as well as how much. This helps guarantee that you have the correct inventory in the appropriate locations to respond to demand.
When you have enough inventory to meet demand in key areas, you may reduce shipping expenses and transit times by optimizing your shipping method.