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Industry Insights

What is Stock Control Software in the Distributive Trades?

Having control over your stock is all about balance: having sufficient goods available that any item can be supplied without delay, without tying up too much money in stock. Sounds simple, but whether you're a wholesaler, distributor, merchant or retailer, carrying hundreds, thousands or millions of products, the importance of stock control can't be overstated.

The importance of stock control

There’s lots that can go wrong.

  • Having too much stock: A 2013 report into the finances of 1,000 top US companies found that, between them, they had nearly half a trillion dollars ($459 billion) unnecessarily held in inventory, due to inferior practices. As well as tying up money in stock, having too much stock can result in you paying too much for storage, or risking goods becoming obsolete, or perishing.
  • Having too little stock: As well the risk of letting your customers down, too frequent ordering incurs additional handling costs, and ordering in smaller amounts won’t get you the best prices from suppliers.
  • Poor visibility and control: Poor control leads to errors such as selling the same stock twice, duplicating orders, and failing to take supplier lead times into account.

What methods can you use?

There are many that depend on industry and type of stock. Some of those most relevant in the distributive trades include:

  • Fixed order quantity or fixed time period: Ordering a fixed quantity, or at a pre-determined time is simple, but not particularly flexible or responsive to the reality of fluctuations in demand.
  • Setting inventory control levels: It is more effective to create a set of detailed stock levels such as maximum, minimum, re-ordering and danger level. This method relies on frequent stock checks to ensure it is accurate.
  • ABC method: This involves allocating items or SKUs to categories A to C depending on contribution to sales, and then focusing stock control efforts accordingly. This method relies on understanding how to categorise SKUs as well as being able to react to change. For example, do some items move fast in summer months but more slowly in winter?
  • Perpetual inventory control: Continuous updating of inventory levels based on transactions. This method is superior to conducting periodic stock takes, but can’t be done manually and relies on using stock control software.
  • Cycle counting: Ongoing stock taking of a small sample of SKUs at a time, in order to cycle through the entire inventory. This is less time consuming than full stock checks, and feeds into perpetual inventory control, correcting for lost or broken stock or scanning errors.

How can software help the process?

Keeping track of all of this data manually can be a huge headache. This is why so many wholesalers, distributors, merchants and retailers use stock control software.

Automated inventory control systems not only make it easier to keep track of your stock levels, they enable you to analyse inventory data to uncover opportunities to improve. A 2011 study found that best in class supply organizations are able to improve inventory levels by between 20% and 50% by employing analytical tools.

What are the advantages?:

  • Visibility for informed decisions: you have the data you need to conduct inventory analysis and implement and track improvements.
  • Centralised control over branches: you can co-ordinate so that each location has the stock it needs, despite differences in demand.
  • Links to other systems: integration with sales order processing and purchasing reduces paperwork, increases efficiency and improves accuracy.
  • Customer service: having the right goods in stock will enable you to offer short lead times and consistently deliver on time, in full.

With a fully integrated system, you can keep yourself updated on how much stock you have and what you might need in future.

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Categories: Distribution

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