If your business is struggling to find the balance between carrying too much excess stock, and stocking-out of your popular items, then you may need extra help in placing optimal orders.
The orders that you place have a direct impact on your cash flow. Order too much stock and you now have cash unnecessarily tied up that will give you a poor turnover. Order too little and you miss out on sales and accounts as your customers look elsewhere for the products. The orders you place are critical for achieving optimal stock levels, customer service, and gross profit.
By answering the following questions, you will better understand where you are and where you need to be for optimal order placements.
Before you place your orders:
- Do you consider an item classification status?
- How do you factor in the sales forecast?
- Are you using the latest stock on hand figures, and how accurate is it?
- Are you considering all existing open purchase orders already placed on your supplier when ordering?
- Are you factoring in the specific item's risk profile, the target fill rate, and the safety stock levels?
- Do you involve key people in the organisation to give their valued input before determining your final order?
- Are you specifying the amount to be ordered only to get a good price?
- Do you know whether the order quantity will take you one step closer to achieving your model inventory level?
- Is the total value of orders being placed within the agreed cash flow budget for the month?
Now that you understand where your gaps are in order replenishment, how should you be placing these orders?
No system is ever perfect at predicting your future sales. Customers’ buying patterns might inexplicably change, or your suppliers may face unexpected delays with production or shipping. However, using a robust and consistent replenishment process will help to minimise your losses and improve your bottom line.
A sound inventory management system, like NETSTOCK, performs many of these steps and allows you to review suggested orders that the system provides to ensure that they are correct before committing valuable working capital.
If you'd like more information about Inventory Management Software, optimal order replenishment or NETSTOCK, please email us.