Do you avoid stock-outs by ordering extras of everything? It may seem like an easy solution – if you have excess stock in your warehouse, you’ll always have what your customers want. But in reality, you’re negatively impacting your profit margins. Consider some of the costs of carrying excess stock:
- The cost of purchasing items you may not be able to sell.
- The transportation costs of getting more stock than you need to your warehouse.
- The cost of using extra space in your warehouse – space that could be used to store more profitable or more popular items.
- The operational costs, including safety equipment, warehouse equipment, and labor and security, to manage excess stock.
- The cost of loss due to obsolescence, breakage, or expiration.
- Lost opportunity cost due to capital that is tied up in inventory that can’t be sold.
So how do you minimize stock-outs without overstocking? First, determine whether you are truly experiencing a stock-out. If you’re using spreadsheets or other manual processes to manage your inventory, you may be relying on inaccurate data. Verify that you really don’t have what you need. Second, if you are experiencing an outage, determine the best way to address it. Is the customer willing to wait? If not, can you acquire the necessary product from another warehouse or another supplier?
Finally, determine what caused the stock-out, and how to avoid another one in the future. This is the perfect opportunity to evaluate the approach you’re using to plan, order, and manage your inventory. An automated inventory management solution gives you the real-time data access and tools you need to optimize your inventory levels.
If it’s time for your organization to minimize stock-outs without overstocking, MicroAccounting can help. Call us today at 855-876-3773 to find out more about our solutions, including Sage100 and Sage Inventory Advisor.