Your stock management runs parallel to your cash flow. Treat it right and it can grow in value, but manage it badly and you'll pay for it in many ways. Effective stock control affects how you manage your finances. To get it right and take advantage of your business opportunities means making your operations as streamlined as possible. You can start with managing your stock better and a clear benefit of doing so is more attractive finance opportunities with business funding in the UK.
What Is Stock Management?
Stock management is simply having access to the information of where all your stock is, how old it is, the price you paid for it, how it’s allocated, optimising your purchasing decisions and ultimately ensuring it isn’t a drain on your finances.
Your stock management should be taking into account:
- Amount or quantity of stock held
- Location of stock
- System of amendment when used by production or allocated to customer
- Parts and serial numbers correctly allocated
- A method of signalling when stocks are low
- Re-ordering system.
The Problem of Old-School Stock Management
Older stock and inventory systems usually involve an operative taking a long walk around the stockroom, counting and marking off each piece of stock currently stored. This can be a laboured and manual process involving nothing more technical than a pad of paper (or a pre-prepared spreadsheet if lucky) and taking a physical count of what the company has stored on pallets, in containers and currently being used in production. The more forward-thinking might even stick a label on each item, indicating that it has been counted and checked.
Time periods for stock checking and inventory control might be daily, weekly monthly or often much longer. Because the act of stock management has to be a timely one, it means taking people off the shop floor, or out of the office and using their time to conduct these inventory checks.
The big problem of this is, while stock is being checked, stock is also being used, and during the time between checks, stock can change dramatically.
And if you are wondering what the problem of this might be, then clearly the issue of cash flow hasn't hit home yet. Cash flow isn't an abundant commodity for most SMEs these days and having to balance up outgoing costs with incoming cash usually balances out in more of the former and less of the latter.
This means that for UK business, where funding is hard, your stock management needs to be run as efficiently as possible; hold too much and it can affect your cash flow, hold too little and you can't service customer orders.
Stock ties up your company's money, which can be better spent elsewhere. Too much also presents a danger of having old-stock, which might either perish or be more difficult to sell-on if lines and products are regularly updated.
Stock Control Methods
Before we get to utilising the vast array of technology available through handheld apps and computer software it is important to be aware of the methodologies involved in managing your stock. The main stock control methodologies you might identify with are:
- Just in Time (JIT) - A method of stock control that was developed by car manufacturer Toyota in the 1970s involves short production times where manufacturers can move from one product to another very easily. It involves holding very little inventory and relying on supply chain partners to deliver timely. It can cut stock holding costs but requires producers to manage their sales and production demand accurately.
- Vendor Managed Inventory - This method helps a manufacturer utilise a distributor's own sales and stock levels, where they get to view each item a distributor carries and generate their own order.
- Customer Managed Inventory (CMI) - This is similar to JIT where it uses similar inventory management matching demand with supply as closely as possible. When a retailer reaches a certain 'replenishment level' an order is automatically sent to the manufacturer, who has already been alerted to fill the order.
- ABC Analysis - Based on the 80-20 principle that 80% of your sales will be focused on only 20% of your stock items. This allows you to divide your stock into three categories A, B and C. The trick is to implement a high level of management on your A stock (which is worth the most but stocked in smaller quantities) and less stringent stock control on your C items (which are small in value but high in number). With B stock items somewhere in the middle.
- Dropshipping - This is a stock method most commonly used by retailers of multiple brands and products where the company doesn't hold much (if any) stock relying on the manufacturer to deliver directly to the customer. This allows a reduction in inventory cost and retain a positive cash flow.
- Bulk Ordering - Lends the notion that it is better and cheaper to buy in bulk, meaning less frequent stock re-ordering. This is especially good for goods with a high customer demand, but less so on your cash flow.
How Business Funding UK Can Optimise Stock Management
Managing your stock more efficiently means entering the realm of lean management systems. Lean management (which has its roots based in JIT stock methodology) systems aim to capitalise on minimising monetary outlay where possible, saving money by streamlining and working towards more efficient technologies. This allows businesses to utilise business funding in the UK in two ways:
- Business Efficiency - When seeking finance, many investors and business finance investment companies look at a business's operations and business efficiency before making the decision to invest. Poor economic decisions by business owners can influence where business funding opportunities are offered. Maximising stock management can help businesses hold a greater control over their cash flow and offer a more coherent and investment-worthy business plan.
- Balance Sheet - When less money is diverted into stock and inventory, it is reflected on the company's bottom line, either through increased profit or through decreased debt exposure. Both of which make a company a more attractive investment opportunity.
Using Technology To Manage Inventory Better
The move to computer-based technology for tracking and managing stock has seen barcode scanning become the dominant form of stock control and helped businesses to reduce overstocking and foresee impending product shortages. With less cash tied into their stock, it can also be an advantage within competing industries.
Capterra lists 20 of the leading software products tasked with tracking and managing stock and inventory and that list is just the tip of the iceberg of technical apps and software systems designed to analyse and optimise stock management.
Stock management through barcode scanning
The big benefit of barcoding is increasing the accuracy of your stock management. Barcoding all your items makes translates to instant stock amendment throughout your organisation and it is significantly more accurate than physical stock checking by employees.
It also saves an incredible amount of time so you don’t have to rely on using up employee time in counting, checking and re-counting your stock levels. Using barcodes allows you to process stock much faster using universal product codes. Which makes it much easier than typing in lengthy product codes and risking mistakes.
Real-Time Analytics & The Future of Stock Management
Not wanting to get too technical, but admitting the need to acknowledge it’s growing importance, real-time analytics are slowly (or quickly, really quickly) changing the landscape of stock and inventory control.
Dr Christoforos Anagnostopoulos - a data scientist and CEO of intelligence company Mentat Innovations - breaks down the value proposition of having real-time analytics at your fingertips:
"Real-time analytics banish the latency between data and action, enabling today's decision-maker to enjoy a broader, more synchronised view of their operating landscape than ever before. It equips professionals with early warnings that help mitigate risk and fast-paced insights that generate short-term opportunities for growth."
What this means for business is that real-time will soon become the 'new normal' for tracking stock and calculating assets.
Retail vs warehouse shipping
The shift in technology usage has meant that there is a blurring between physical stock checking and an increased reliance on computerised systems automatically updating and amending stock levels, often directly as a result of customer ordering. This is especially true for retailers where hybridisation of stock control has left many opting for a system of stock management where retailers ship directly to customers from physical stores rather than big warehouses.
Big data providing operational solutions
With more information on buying habits being monitored, companies can not only implement shifts in buying habits, but also make immediate changes to their product focus in the direction of shifting consumer demands. As we have noted, there is already a huge number of software products becoming available to monitor increasingly specific manufacturing, retail and production needs. Which allows almost any business to up their stock management game and maintain the synergy with customer demands.
Whatever stock management system you use and whether or not you are looking to invest in more technology to do so, you need it to be a solid part of your business planning. It increases the efficiency of your operation and allows your business to be in a better position to access business funding in the UK. As the manufacturing and retail industry moves towards more efficient process, how you react to this technology can have a significant effect on your business’s chances of success.