Your Warehouse Stock = Money

In every organisation, there are very tight financial controls. Sometimes, to the point that the constraints can stifle the business. However, we find that many businesses who hold stock in the form of parts for assembly or stock for sale do not have the same stringent measures and controls in place.

At the end of the day, any item on a stock list holds financial value for the business and should be treated accordingly. A key contractual indicator when using an external logistics specialist is stock loss and an agreed tolerance level. It is understood that damages occur, and that mistakes happen but this should be kept within agreed parameters. Regular stock takes and inventory reconciliation will ensure that any loss or damages are noted and adjusted accordingly in the books.

Whilst we understand that if your stock is under your own roof and managed by your own people it may be felt that these measures are not necessary. In our experience, we have seen that failing to invest the time in keeping your inventory in order, you actually waste time, cause customer delays, and cause unnecessary expenses in replacements, damage or wasted space.

Professional logistics operators have sophisticated warehouse management systems (WMS) which can be quite costly. However, we believe that IT is an enabler of processes. If you have the right processes in place, you will be able to manage your smaller scale warehouse with the same controls as logistics specialists for a fraction of the cost.

It is of paramount importance that you understand your storage processes and then ensure that the processes are designed around your business. There is no point in complicating something through intricate processes, but there is a need for control in your stock management.

How often does someone run in and need a spare part urgently? This wouldn’t be properly recorded, or perhaps something is damaged in the urgency. All these bad habits and short-cuts will result in incorrect stock records, potential out of stock items, as well as incorrect financial records.

It is not always immediately clear who owns and is responsible for a process. In the case of stock in your warehouse, we believe that the finance department are ultimately in charge of the stock. Stock in your warehouse is money. There are clear operational requirements from the teams within the warehouse and workshops, but finance are responsible for ensuring that the stock is protected.

Space is also a cost to the business; with good stock control you will be able to optimise reordering cycles through efficient forecasting and therefore understand space requirements. Too much slow-moving stock will take up space and also tie up working capital which can be used in other areas of the business.

Focusing on capacity management and ensuring stock is put away as per several criteria will enable you to maximise operational efficiency and save space. Key areas to look at are:

1. Fast- or slow-moving items
Fast moving items required should usually be in easy to access locations. Slow moving items can be stored in racking or away from the operations area

2. To the best of your ability, ensure that all the same products are stored together
It may seem easier to put away products quickly wherever there is space. In the long run you will waste both time and space looking for an individual item.

3. Ensure that all labels are facing the front
There should not be a need to waste time hunting for a box.

4. Big items should be stored appropriately
This should be in an area where they can be moved easily if required, without blocking access areas.

5. Ensure that there is no congestion with no access points blocked
A congested warehouse is very difficult to work in and will eventually result in damages and wasted time.

6. Ensure there is an up-to-date stock list of all items available and regular counts are made of fast-moving items
It may seem unnecessary, but regular counts save a huge amount of time when there is a stock take as well as when looking for items that appear missing.

7. Allow plenty of time to prepare the warehouse for a stock take, taking time to prepare the products, check labels and general housekeeping
This is time well spent and will save time in the stock count and publishing results.

8. Ensure to plan and stop operations when the stock count is going on to maintain accuracy, prevent delays in counting, and ensure stock reconciliations

At the end of the financial year, most businesses are required to have their books audited and part of this audit will be annual stock take. Remove the stress and worry associated with audits by maintaining effective operational processes throughout the year. If your operational processes have either not been defined or have not been followed, you will find unpleasant surprises during the stock take. It can become a consuming investigative process to reconcile stock and find where things have gone or not gone, as the case maybe.

For even the most complex operations, depending on staff availability, a stock take should be carried out, reconciled, and signed off in a few days. Understanding, reviewing, and managing your stock and warehouse procedures, enables your business to provide the high level of customer service required, control your costs and offers the financial visibility needed to maximise cash flow.

For support with your people and processes, get in touch via action@identifyaction.com