In a product-based business, having an effective stock management system is critical, especially in the lead up to the busy Christmas trading period. This system should provide your business and customers with real-time updates on product availability. Not only does this prevent your customers from ordering items that are out of stock, but having a strong stock control system ensures your business orders only what it needs from suppliers. Here, we outline the importance of implementing an effective stock management system in your business.
When do you need a stock control system?
Ideally, from the moment you begin selling products or services, you should record what your business has sold and when. Recording this data consistently over time allows you to see what products and services are in high and low demand. Generally, these products and services fall into four types of inventory:
- Raw materials
- Work-in-progress (WIP)
- Finished goods
- Maintenance, repair and overhaul (MRO).
If you’ve been in business for some time and don’t have a stock management system, your business may be confronting the issues associated with having poor governance and controls around your stock. These issues may include increased warehousing demand, overstocked goods, selling out of stock items, poor and unknown product availability and inefficiencies in ordering from suppliers. All of these challenges can result in customers going elsewhere to purchase, along with increasing financial risk in your business. According to SymphonyIRI Group, 70 per cent of shoppers would buy a product from a competitor if it was unavailable rather than back-ordering the item.
Using data to manage inventory reduces risk and keeps customers happy
Before businesses digitised their stock management systems, this process was manual and relied on people to physically count and record inventory levels. Not only is this process time consuming, but it also increases the risk of human error. Despite these risks in comparison to the benefits of digitising inventory management, many businesses still implement a manual process or use flawed data to make purchasing decisions. For example, a study of small and medium businesses in the United States found 46 per cent of SMEs don’t track their inventory or use manual methods.
Instead of carrying the risk of having too much stock and needing to discount prices to move excess product, your business will have the exact data it needs to meet customer demand while keeping product turnover high. This is particularly important for a business that sells perishable goods such as food, makeup and beauty products, pet food and plants, for example.
The growth of eCommerce in Australia demands strong inventory management
In Australia, eCommerce sales continue to grow rapidly. Over 73 per cent of Australian households shopped online in 2018. The increasing popularity of eCommerce in Australia coupled with the recent COVID-19 lockdowns and restrictions saw online retail sales skyrocket by 50.4 per cent year-on-year to May, according to the NAB Online Retail Sales Index.
The Index, released in July, reported that Australians spent $34.18 billion on eCommerce in the year to 31 May 2020. The largest areas of spending online were takeaway food (approximately $190 million), games and toys, (approximately $90 million), and grocery and liquor ($50 million). With the large volume of retail sales in Australia occurring online, businesses need to optimise their systems and processes to provide a seamless eCommerce experience or risk losing customers to competitors. An effective stock management system is a crucial part of ensuring businesses have the right frameworks to compete online.
What kind of data is recorded in a stock control system?
Different stock management software will record different data, but there are key pieces of information that your system should record. This includes daily sales and stock updates, real-time inventory data across the supply chain, freight data and month-on-month and year-on-year sales data. While recording this information is one part of the process, ensuring it integrates across your business from your online store to in-store sales is what will set your inventory management system apart from competitors.
Best practices in inventory management
Once you are collecting, integrating and analysing high-quality data across your business, you will have the foundations to implement best practices in stock management, if you haven’t already. Some of these best practices include:
- Sales forecasting: With effective inventory management, you can produce more accurate sales forecasting, which will also improve your cash flow forecasting and modelling. This process will also help you prepare for busy periods such as the Black Friday sales, Christmas retail period and the Boxing Day sales.
- Implement first in, first out (FIFO) with more accuracy: Products should be sold in the order in which they were supplied or created, which is particularly important for perishable items.
- Stocktake: To ensure your digital systems reflect your physical stock levels, you’ll still need to complete an in-person audit of your inventory. With an effective stock control system in place, you can be proactive about auditing your stock by focusing first on high-demand products or those with stocking issues.
Implement an effective stock management system with Spenda
At Spenda, we are continually evolving our suite of products and tools that integrate across the business from your online payment gateway to stock management. Our eCommerce product, coupled with our inventory management tool, tracks stock levels in real-time while updating the data across all platforms in your business. Not only does Spenda take the guesswork out of managing stock levels, but it provides real-time updates to your customers. You’ll never sell an out of stock item again.
Click here to book a demo, and learn more about how you can implement an effective stock management system in your business to improve efficiency, provide an exceptional customer experience and increase your company’s profitability.