Running a successful business has numerous nuances. This challenge became all the more real when the COVID-19 pandemic led to a global lockdown. A few retailers had to battle the wrath of their customers because of a shortage of stock, while others experienced stock to waste. However, the challenge of preventing stock wastage is not something that is unheard of! No matter the scale of operations, it all boils down to effectively handling demand and supply. To achieve this, organizations must master the art of maintaining a healthy inventory.
By a healthy inventory, we mean one where the demand and supply are in tandem, and there is no dearth of wastage of goods. However, it is not something that is as easy to achieve as it seems. That is because an organization has to take into account numerous factors to understand how they can avoid wastage of stock. Read on to find out how to avoid unnecessary stock wastage.
Reduce Lead Time
Lead time is the duration between order placement and its delivery. While the ideal situation would have instant delivery, it is not practically possible. And that’s why organizations take a few days to deliver the goods and services.
However, you can significantly reduce this duration by maintaining an inventory that matches your demand and order levels. This would reduce the lead time and lead to instant revenue generation as you would not have to make your customer wait for longer periods as you are out of stock.
Maintain a Healthy Inventory
A healthy inventory is when you do not have a shortage or overflow of goods at your disposal. To achieve this, you need to control your inventory with effective inventory management. What is inventory management? How is it done? And why is it important?
Inventory management is the three-step process when the seller sources the produced goods or raw material for sale. They then store and sell the goods based on the market demand. When a business establishment can rightly forecast the demand for the goods, they would have an effective inventory management system in place with the right amount of goods available at the right time. They can sell it at the right prices.
Having an effective inventory management system would reduce the lead time and thereby building customer satisfaction.
Use Technology
There’s numerous predictive analytics software in the market which helps you with sales forecasting. Using these tools, you can determine the future sale’s outcome and track the stock in your warehouse.
When the inventory falls below a certain mark, you can program these tools to alert the person concerned to place additional orders. That way, you are not bearing excessive warehouse expenses for overstocking or leaving your customers disappointed with a huge wait time.
Have a Consignment Inventory
A consignment inventory is when the supplier holds ownership of the goods until it is sold to the customers. This inventory method is ideal in online sales as the demand for goods and orders’ location could be uncertain.
It takes away the burden and expenditure of maintaining a stock from the retailer and shifts it to the manufacturer or supplier. As you would be paying for the consignment and the inventory only when the product is sold, the financial risk involved is minimal.
Have an Emergency Stock
As the name suggests, this stock is not for immediate sale. Instead, it will come to your rescue on a rainy day when there is a sudden demand for your goods, delay in procuring fresh stock, and so on. However, remember that the emergency or reserve stock should be a small percentage of your entire stock. It might become a liability rather than an asset.
Stockouts and stock wastage are both nightmares to every operations manager. Only after several years of experience can you understand how to optimize the stock levels to match your business needs. However, until then, follow these steps to avoid any mistakes and unnecessary stock wastage.