11 October 2017

The five stages of stock management

Getting a grip on stock management – and building a process that can scale with the business – requires more than Excel sheets.

The clothing retailer Asos has had its fair share of crises in its warehouse over its 17 years.

Back in 2005, its original UK distribution centre was destroyed in an oil depot explosion, taking the business out of action for five weeks over the lucrative Christmas period. Then, in 2014, a blaze at another of its UK warehouses halted trading for three days. Most recently, it lost an estimated £6.25m-worth of stock when a fire broke out at its Berlin warehouse.

During this latest incident, however, Asos was able to manage its sudden loss of inventory by diverting orders to its warehouse in Barnsley.

Asos has the cash and expertise to deal with incidents like these. But building an inventory management process that can scale with the business and protects from any unexpected shocks – all while keeping excess stock levels to a minimum – is tricky. Stephen Jones at inventory management software provider Unleashed outlines the five stages of stock management growth.

1. Setting up the spreadsheets

Spreadsheets are the first port of call for most businesses looking to join the dots between stock and sales.

It’s a low-cost way to get a handle on the numbers, but typically difficult to hand over within teams.

‘The spreadsheets are great for the person who designs them,’ says Stephen Jones, who heads up the UK team at Unleashed. ‘But as soon as you’ve got more than one individual in the business, it becomes very hard to coordinate your efforts and collaborate, even now you’ve got Google Sheets.’

2. Starting to forecast

Food and drink or retail businesses selling products at high volumes should get into good stock rotation habits. ‘It’s not just for perishables, but any product. You don’t want boxes sat there while you’re picking up whatever happens to be closest to the door,’ Jones explains. Not only will this ensure items are still in good shape by the time they get to customers, it will also help reduce waste.

While it’s difficult for young businesses still in the process of bidding for big retail contracts to predict how much stock they might be selling in coming months, there are ways to prevent being caught out by a big order.

Jones recommends holding a minimum amount of items that have long delivery times – packaging materials from China is a common example.

3. More sophisticated stock takes 

It’s usual for businesses to do stock takes annually, but Jones says every three months is better. He reckons that companies that wait a year are often surprised by how far off their inventory calculations are.

Jones points to fizzy drinks startup Ugly Drinks as an example of a company that’s benefited from having a rigorous stock management process in place. ‘If they just brought canned drinks and sold them on, you could run that steadily on some spreadsheets,’ he says. ‘But if you’ve got a finished product that’s going to be sold in varying units of measure, whether that’s can sizes, cases or palettes, that kind of complexity would scream out that you need a framework to ensure it’s managed properly.’

Stock takes shouldn’t just be about updating inventory numbers, but also look at costs. Currency fluctuations and changes in suppliers need to be recorded. ‘It’s usually the complexity of the cost picture that gets missed,’ he adds.

4. Dedicated staffing

As the business grows, not only will stock takes and inventory management become more complex, but there will be more people wanting to analyse the inventory.

If it was a founder that set up the spreadsheet in the first place, it’s likely there will also be increased demand on their time from other aspects of running the business – in other words, they won’t have time to answer queries about stock numbers.

Unleashed, Khaos Control Cloud, Inventory Now and Jump Stock are examples of platforms that allow for collaboration, but it’s still a good idea to have a dedicated member of staff who’s responsible for managing the system.

‘If you’re talking about a manufacturing business, that person isn’t necessarily the same person who would be in charge of production,’ Jones says. ‘It’s important to have a “warehouse master”, who sets the tone.’

5. Barcoding

When it gets to the point that product ranges are expanding dramatically, the next step is likely to be barcoding.

Apps like Label Flow and Bar Tender are available to make the process of implementing barcodes less onerous, but there is more to consider than sticking labels on boxes.

‘It’s not a foolproof system,’ Jones warns. ‘A lot of people [think] barcoding reduces human error, but the truth is it’s still being operated by human beings.’ Jones says the biggest challenge comes about when working with third party suppliers, who may have their own barcoding system in place.