Have you ever prepared for a seasonal turnover spike only to run short of stock exactly when you least want to? Or spotted a turnover spike too late to stock up for it? Or simply missed the boat completely? Knowing when to order stock is a bit of a calculated gamble, and, the more relevant information you have the better you can manage your stock re-ordering. I say ‘relevant’ specifically because some people simply go with the prior months sales information as an indication of the following months orders. Obviously, in most instances, this won’t be the most effective ordering method to use. Obvious reasons why not include: what if the previous month was one of your exceptions? (i.e.: very high, or, very low), or, if a sales person made an ‘out of the ordinary’ sale, then basing your next months re-order on that exception will clearly skew your stock and negatively impact your Cash Flow.
I know that not all companies using Inventory will carry stock, some will only place orders as and when they receive customer orders. However, those that do carry stock will be well aware of the stock re-ordering pitfalls: “ordered too much”, “ordered to few”,”ordered the wrong items”, etc, etc. Having a few simple indicators handy when calculating one’s stock order, can often, and, sometimes quite easily assist your ordering clerk with ensuring the accuracy of the stock re-ordering process.
Some useful stock re-ordering indicators:
Prior Year sales for same period
Prior Month sales
Stock On Hand
Outstanding Purchase Orders (and lead time of these orders)
Slow moving stock
Fast moving stock
Lead times (eg: if at the end of January your ordering clerk orders stock for Valentines day, but, your lead time is 21 days, then you’re stuffed aren’t you?)
Industry specific events
Local/National/International events (school holidays, Olympics, etc)
National & International Holidays (imagine a chocolate company not catering for Valentines Day or Easter)
Some of these indicators are obvious and easily obtained. For the more precise ones (Inventory Trend Analysis), there are various reporting options available. This is, of course, a very general overview of the stock ordering process as there are many, many more factors that will impact industry specific companies eg: Manufacturing, Lot Items, FMCG, etc, etc.
Essentially what I’m trying say is: “Setup your environment to give you as much information regarding your stock movement as you can”, and, “don’t order your stock without taking in as many factors as your environment allows you too”.
Here’s to fast-moving, and, profitable stock rotation 🙂