6 Factors for Successful Stock Management

Effective stock management is one of the most important functions a business needs to master in order to increase efficiency, reduce costs,...

Indeed Flex

15 June 2022

6 min read

Effective stock management is one of the most important functions a business needs to master in order to increase efficiency, reduce costs, and enhance productivity. There are numerous factors that can impact stock management.

Stock management is a key issue whichever industry the business is in, as long as it needs to meet the market demand by providing the right supply in order to be profitable. Some of these factors are outside of the business’ control, such as unforeseen natural disasters and erratic market fluctuations. However, some factors are more manageable.

The six factors that we will discuss within this article can lead to significant bottom-line savings when implemented correctly. They can ensure that the business is operating efficiently. The following six factors are key aspects of effective and successful stock management.

1. Optimal Demand Forecast

A business retains stock with the intention of selling it to its customers. The way a business chooses to manage their stock, including how much buffer stock to hold, depends on the customer demand, as well as their supplier lead times. Accurate demand forecasts would ensure that the business does not end up with either too little or too much stock as both would lead to short-term or long-term loss of profit.

If the business holds too little stock, it may be unable to meet its customer demand. This would earn them a dissatisfied or even a lost customer.

However, if the business holds too much stock, then that is capital tied up in a stock that is not moving. The stock would remain, holding up valuable warehouse space, as well as cash, and thus potentially leading to a loss of profit.

With ERP systems often over-supplying data, it is not always easy to gain an accurate forecast. In most businesses, accurate demand forecasts are likely to be a result of procurement, customer service, and warehouse teams working together. Accurate demand forecasts allow a business to plan for the best inventory control methods and avoid costly mistakes of understocking or overstocking.

2. Efficient Supply Chain

If customer demand forecasts are one key area for efficient stock management, then awareness and management of the business’ supply chain are another. A supply chain is the entire spectrum of suppliers a business needs in order to fulfil their end customer’s demand.

For example, clothing manufacturers could potentially have suppliers of various fabrics, as well as suppliers of other accessories such as buttons and zippers. They may also have external designers who provide designs for manufacturing.

There could be different suppliers who provide packaging, i.e. plastic wrappers that an item of clothing may be wrapped in, someone who prints tags that are attached, and someone else who makes the strings with which those tags are attached. This is just one example.

Supply chains, especially in today’s global market, can often be complicated and spread geographically far apart. Improving supply chain efficiency begins with firstly selecting the right suppliers for the business. Sometimes the right suppliers are chosen because of the shortest lead times, or because of the cheapest prices, but often the best suppliers are those who can reliably meet demand at a reasonable price.

The ultimate balancing act in successful stock management is the availability of cost versus cost management. A robust supply chain ensures that the business can practice lean manufacturing, and eliminates the need for storing excessive buffer stock. It also builds trust throughout the entire chain, where everyone is working at maximum, or near-maximum efficiency, thus reducing waste and increasing profit for all those involved.

3. Inventory Control


Every business, regardless of the industry, needs a suitable inventory control method. Depending on the needs of the business suitable methods may vary such as cycle counts, stock rotation, or FIFO (First-In-First-Out).

Inventory control is directly related to financial costs to a business, which makes it one of the most important factors of successful stock management. Inventory control can provide a detailed view of the stock situation in a warehouse. This enables decision-makers to implement appropriate actions. ABC and XYZ analyses and KPI monitoring can lead to a transparent warehouse, providing an even better overview.

However, any data that comes out of the system is only as good as the data that’s been put into the system in the first place. Thus, the accuracy of the available information is extremely important to the results. Inaccurate data would lead to inaccurate results, and that in turn can lead to decision-makers making misguided business decisions.

4. Barcoding

Whatever inventory control methods the business may aspire to, without a system to track, trace, and account for the inventory in real-time, the chances of inaccurate data are high.

Barcoding is an increasingly popular way of labelling and tracking inventory. A special barcode is designed for a company in accordance with whatever data the company wants to track. This barcode is attached to the inventory, and scanned at each stage of the process, thus tracking inventory in real-time.

Barcoding ties in with Inventory Management Systems, thus reducing the risk of human error. It enables every component in the production process to be tracked and accounted for.

The potential downside to it is that the third-party suppliers may have their own barcoding systems. However, this can be prevented by ensuring either different barcoding designs or placements that allow the staff to differentiate between internal and external barcodes. Scanner configurations can also assist with this, by allowing only internal barcodes to be scanned.

5. Warehouse Flow iStock-530203112.jpg

The days of warehouses being a dumping ground full of boxes are long gone in even remotely successful organisations. 5S is one of the most common principles used in warehousing today, and it includes: sorting, setting order, systematic cleaning, standardising, and sustaining the discipline. Other lean manufacturing and organisational concepts may also be used instead of 5S.

However, the principle behind the warehouse flow remains the same: to ensure that poor processes do not lead to financial costs. Warehouse flow ensures efficiency in the process, and leads to more successful stock management.

6. Staffing

The right staff, with the correct training, can make or break your stock management. It doesn’t matter how effective your systems are if there are no people to put that data into practice.

Whether it’s fully licensed forklift drivers who are efficient at what they do, or an experienced warehouse manager who knows how to manage warehouse workers, packaging staff, and delivery drivers – your staff can be an invaluable asset in managing your stock.

Each of the above factors can help businesses achieve successful stock management, thus resulting in increased efficiency and reduced costs.