Businesses of all sizes suffer issues with stock control and inventory management. “Shrinkage” accounts for around 1.4% of all sales which includes theft by customers, staff and administrative errors. Whilst we’re focused primarily on the latter, it is important to note that when you trying to grow your business from a relatively small base, attention to your stock levels and how you manage inventory not only affects your ability to grow in terms of your profit or loss, but also in customer satisfaction.
There are some tips to help you reduce ‘shrinkage’ that can greatly help as you look to expand your business if you currently don’t outsource your order fulfilment processes:
- Check all stock inwards
The first focus should always be to check what actually gets delivered against what you have ordered from your supplier. It is so easy to assume that the numbers match up, but from talking to our customers we note that a good 1% to 2% of stock orders are incorrectly packed. If you just assume that you have the correct numbers of products when you add the inventory to your shelves you are liable to be short stocked when you receive a customer order. Another issue is that you might actually have more stock than you need and you won’t know when to reduce prices to move it or order more when you don’t need to.
- Store your stock wisely
It is so easy to just place your stock wherever it fits but this can cause errors when your staff are picking in a hurry. If you have similar products with similar packaging such as the Domori il 70% and the 100% – storing each chocolate next to each other is likely to cause errors as the packaging is almost identical.
- Name your products clearly
If you stock products in different sizes, make sure that any order form you get through your system makes it absolutely clear which size to pack. If you need to alter your packing slips to make it totally clear then do so. You may even want to colour code these slips and match them to a colour label on the individual product packages.
- Keep control of Best Before Dates
If you offer products with Best Before Dates you are obviously liable to hefty fines if you ship out of date products to customers. It is important, therefore, that you create a reminder system for each product line for when each product should have their price lowered ahead of time so you can shift any remaining stock, and again when the product should absolutely be taking off your website.It is also important that you check the Best Before date as you pack each order. Often you will have multiple batches in stock so the dates may be different and you cannot always assume that you are still sending out products from an ‘in date’ batch.
- Don’t compound problems
If you send a customer the wrong products, when you send out another make sure you amend the stock levels of the relevant products. It seems obvious to state, but in the match rush of running an ecommerce business this can be easily over-looked.
- Set a minimum stock level
Each supplier will have different lead times and if you did want to avoid going out of stock you will need to establish how long it normally takes to restock and how long it normally takes for that minimum stock level to run out. Ideally you give yourself a buffer amount when you try and establish how much stock you need to have in reserve to cover the amount of time it takes to restock.This calculation is confused by the issue of having some lines from the one supplier being in greater demand than other lines and that you need to take into account of restocking these less-demanded items now to take advantage of the lower effective transportation cost per unit.
- Think about the Wilson EOQ Model
This is a formula devised by Ford W. Harrison but applied by R. H. Wilson extensively to determine the optimal order size for a given unit of inventory. You can use this website to help you work it out and you can find a more detailed explanation here.
- Consider an automated solution
Our solution is computer operated and is based on barcodes to minimise the picking error rate to almost nothing. It does, however, require the correct use of the barcodes in the first place. If you are working on batches rather than the multiple picking of varied products for a given order then this does reduce the error rate significantly.
- Manage returns effectively
One of the biggest issues when many retailers, certainly in the fashion and electronics markets is the correct handling of returns. There are obviously legal requirements relating to distance selling regulations but if you do have to restock an unwanted item then make sure all your usual labelling systems are still in place. If you do have any stock returned because they are defective then you will also have to ensure that your stock levels aren’t adjusted upwards and that you account for it with your suppliers.
- Regular stock checks
The obvious solution is to carry out regular stock checks. If you have made errors it is better to spot them before you take a customer’s order given that you will have to spend time contacting them if you have spotted an error after order, or restocking if you haven’t. Even if you don’t have time to check your entire stock frequently, do ensure that you at least rotate your stock checking and review the stock levels of a different manufacturer on a regular basis.
There are often many small changes you can make to your inventory management & picking, packing and shipping processes that can have significant impacts on the efficiency and productivity of your business. Take a step back, analyse every set up the ordering and fulfilment processes and establish if any can be improved to minimise fulfilment errors. Doing so can have a noticeable impact on your bottom line and allow you to grow faster.