What is stock management and why is it so important in your warehouse?
In the business logistics sector, stock management is one of the most important elements for success. A large part of the profits and losses of a company in this sector depend on it. This is why, in this article, we explain what exactly this concept refers to and what are its keys.
What stock management is: definition
According to the RAE, stock is the Anglo-Saxon term equivalent to stock, which refers to the “merchandise” that a company has “destined for sale” and which is “kept in a warehouse or shop”.
Therefore, stock management involves various processes. Firstly, that of bringing in these goods, by means of new purchases from suppliers, replenishment or manufacture itself. After that, it is time to optimise the issues related to storage, such as the organisation and inventory of the goods, their insurance, etc. And finally, the process of disposing of these goods in the shop.
The decisions that have to be taken in this chain have to do with very different aspects, such as the size of the store, the rate of sale of the goods, their expiry or obsolescence or even the seasonality in the entry and exit of material. Therefore, what works for a small company may not work for a larger one, and vice versa.
Importance of correct stock management
Incorrect stock management can lead to economic losses or, at the very least, to a reduction in profits. And this happens when there is too much stock in the shop or in the store, but also when there is too little.
In the first case, when the stock is excessive, the consequence is an increase in related costs. For example, storage costs, since the larger the stock is, the more space is needed to store it. In addition, the greater the cost of insuring the goods, because the value of the packaging will be higher. Indirect costs are no less important: the larger the stock, the greater the risk of stock shortage and obsolescence or expiry, with the consequent economic loss that this entails.
On the other hand, having a very limited stock is not appropriate either. Although this reduces costs, the truth is that it also generates another unintended consequence: a significant drain on the company’s cash flow, as it is unable to meet the customer’s purchasing demands. And this, in turn, has another negative effect in the medium and long term: the customer’s frustration, which will lead him to satisfy his demands with the competition.
Therefore, as is often the case, the secret of good stock management lies in the middle ground. And to find it, it is necessary to have an in-depth knowledge of the sector, customer demand and the nature of the company itself. All of these keys will be covered in the Mediterrani Business Logistics Degree, specifically in subjects such as Storage Management and Stock Management.
