Take control of your stock with simple tips for maintaining the right inventory levels and keeping your supply chain running smoothly.
Managing inventory doesn’t have to be a guessing game. With the right strategies, you can optimize stock levels and ensure your supply chain runs smoothly—saving you from excess inventory costs and stock-outs that risk lost sales and unhappy customers.
In this article, we’ll cover why stock management is essential, key principles to follow, whether Excel is a viable option, common mistakes to avoid, and effective strategies for improvement.
Table of contents
1 What is stock management?
Stock management is the process of planning, controlling, and organizing your inventory. The goal? To maintain enough stock to meet customer needs, without overstocking and incurring unnecessary costs.
The right balance is critical—too much inventory ties up cash and storage, while too little can lead to missed sales. Successful stock management can help avoid both, ensuring you’re always in control of your stock levels.
2 How stock management impacts your business
Stock management plays a crucial role in your business’s success and profitability, no matter the industry. Effective inventory management improves order fulfillment, enhances overall performance, and ensures the right stock levels. It also speeds up deliveries and simplifies the return process, helping your business run more smoothly.
Manufacturing
Stock management is key to a smooth production process in the manufacturing industry. Having the right materials at the right time and place is essential to keeping production on schedule and reducing delays. Optimized inventory levels help free up cash flow and cut holding costs. Accurate stock data lets manufacturers spot demand trends and plan for future production needs, improving productivity and minimizing downtime.
Retail
For the retail industry, stock management plays a direct role in customer satisfaction and profitability. Keeping the right amount of stock ensures customers find what they need, reducing the risk of lost sales and disappointed shoppers. On the flip side, too much stock ties up capital and increases the risk of items becoming outdated. Efficient stock management helps retailers strike this balance, meet customer demand, and lower operating costs. Tools like real-time reporting and demand forecasting allow for data-driven decisions that accelerate fulfillment and keep retailers competitive.
Wholesale
Wholesale businesses depend on strong stock management to meet customer demands efficiently. Keeping inventory levels optimized helps serve retailers, suppliers, and other customers. With good stock management, wholesalers can lower holding costs, reduce lead times, and improve order accuracy. Monitoring inventory in real-time also helps respond to demand changes, preventing stock-outs that could affect downstream partners.
3 Key principles of stock management
Good inventory management is crucial for accurately predicting demand and optimizing fulfillment. Here are the fundamentals of great stock management:
Accurate and regular inventory management: Accurate and regular stock management is an essential inventory tracking and monitoring principle. Implementing reliable inventory management software allows businesses to monitor inventory levels, sales, and stock movements in real time. This data forms the foundation for making informed and data-driven decisions, minimizing stock-outs, and reducing excess inventory.
Demand forecasting: Accurate demand forecasting is essential for predicting future inventory needs and avoiding stock-outs or excess stock.
Classifying inventory: ABC analysis helps categorize items based on their value and impact on the business. Classifying inventory into categories A, B, and C helps prioritize items according to their importance and profitability. Class A items, with high value and demand, require closer monitoring and more frequent reordering. Class C items, with lower value and demand, can be managed with less attention.
Stock rotation: Stock rotation involves adopting the First-In, First-Out (FIFO) method to ensure that older stock is sold or used first, preventing product obsolescence and waste. Stock rotation is relevant for products with limited shelf life, such as perishables or items with expiration dates.
Safety stock: Safety stock is a buffer quantity maintained to address unexpected fluctuations in demand, supply chain disruptions, or supplier delays. With safety stock – you can prevent stock-outs during unforeseen events and maintain a smooth flow of operations.
Supplier management: Build strong relationships with suppliers to ensure reliable deliveries and favorable terms. Have the ability to monitor supplier performance.
Inventory control vs. inventory management
While inventory management sets the direction, inventory control implements the tactics to achieve efficient stock management.
| Inventory management involves strategically planning and coordinating all inventory-related activities, such as: |
Inventory control involves focusing on the daily operational tasks of managing inventory, including: |
| demand forecasting | stock replenishment |
| policy setting | tracking, audits, and minimizing carrying costs |
| aligning inventory with business goals | optimizing inventory levels and ensuring smooth operations. |
| It takes a long-term perspective, aiming to develop efficient inventory strategies |
Visibility for continued improvement of key performance indicators
Stock management is not fluid and requires continuous review and improvement. Regularly analyzing inventory performance, identifying areas for enhancement, and adapting strategies to changing market conditions and business needs are crucial for success. Periodically monitoring and analyzing KPIs like stock holding and fill rate provides valuable insights for ongoing improvements and better decision-making.
4 Can I use Excel for stock management?
While Excel can be a cost-effective and accessible tool for small businesses with relatively small inventory needs, it has limitations for comprehensive stock management. Excel lacks real-time updates, leading to data discrepancies and potential stock-outs. As your business grows, managing stock through Excel becomes increasingly difficult and prone to errors. To achieve optimal stock management, consider investing in a dedicated cloud-based inventory management solution that provides real-time monitoring, demand forecasting, automated processes, and reporting capabilities.
Inventory management software offers a more efficient alternative to Excel, allowing businesses to monitor and manage their stockrooms in real time – and ensuring you’re always prepared to manage delays or disruptive events. These apps feature inventory monitoring, stock level alerts, and compatibility with business operations, making them a superior choice for growing businesses.
Watch how All Round Supplies, an electrical infrastructure supplier, saved time by replacing Excel with Netstock.
5 The top stock management mistakes to avoid
Avoid these pitfalls to keep your stock management on track:
- Under-ordering or over-ordering: Failing to maintain optimal stock levels can hurt your business.
- Ignoring seasonal demand: Plan ahead for fluctuating demand during peak seasons.
- Manual data entry errors: Poor data can lead to incorrect stock forecasts and costly mistakes.
- Lack of automation: Manual processes are time-consuming and error-prone. Automated tools ensure better accuracy.
- Poor communication: Misalignment between teams can lead to stock imbalances.
Keir Surgical, a distributor of surgical supplies, says, “Supplier lead times were always a guess and based on a supplier’s full line as opposed to individual items. It took tedious amounts of time to work out our orders each month, and I would need to go back and check every row to make sure that the calculated number made sense based on the three or 6-months sales trend.”
6 How to improve your business’s stock management
Improving stock management is easier than you think with these strategies:
- Invest in the right technology: Automated insights and predictive planning can help you balance stock levels more efficiently.
- Use inventory management software: Real-time tracking, demand forecasting, and data-driven insights can streamline your operations.
- Leverage tools like Netstock: With features like real-time tracking and automated stock optimization, Netstock can help businesses reduce holding costs, prevent stock-outs, and ensure smooth operations.
Invest in technology that helps you predict and plan.
With the release of the Predictive Planning Suite, powered by AI, Netstock has also launched the Opportunity Engine™, a powerful new AI-powered tool. The Opportunity Engine is the ultimate digital assistant, designed to analyze all inventory data to quickly anticipate potential problems and provide recommendations in real-time, enabling customers to respond and rectify issues long before they become a problem.
What leads to optimal stock management?
- Regularly assessing stock management processes
- Identifying areas for enhancement, for example identifying slow-moving or obsolete stock
- Adapting strategies to changing market conditions and business needs
- Utilizing a management system to efficiently monitor, manage, and optimize stock levels, ensuring real-time inventory updates and preventing stock-outs
Effective stock management isn’t just about tracking numbers—it’s about making smarter decisions that drive profitability. Regularly reviewing your processes and adapting to changes in demand will keep your business ahead of the curve. By investing in the right tools and building strong relationships with suppliers, you’ll unlock the potential for smoother operations and sustained growth.
