How to provide stock availability?
Qualitative stock management ensures constant product availability on the shelf in retail or in the warehouse of distributor and manufacturer. When answering the question “What is important for the buyer when buying?”, the various factors can be distinguished: price, service level, quality, etc., but if the goods are not on the shelf, then all other factors are secondary.
Stock availability is important!
In average practice, stock management is performed according to the “push” system. All that was manufactured (purchased) should be pushed to the next element of the supply chain: manufacturer pushes goods to distributor, whereas distributor pushes them to the retail chain; the retail chain, sometimes with great efforts, pushes goods to the buyer. Usually, in such system of stock allocation, one type of goods is always in short supply, while the other is always in excess. Sales forecast serves as a basis for stock level estimation: after analyzing past, the consumption forecast for the future is made. And if we haven’t guessed, we have to regret over the “pushed” in-demand SKU and losses of sales, as well as to suffer from the surplus and loss from the slow-selling ones. And a client, while expecting to find a specific SKU and after not finding it, becomes disappointed and sales fall off.
There is another approach – “pull”.
In the “pull” system stock management starts from the last element in supply chain – from the buyer himself. As soon as a product is purchased, i.e. it is out from the shelf, information passes to the next element – central warehouse of the chain, and the warehouse replenishes the stock of this product. In this system, warehouse plays the important role as it is the buffer for amortization of demand fluctuations, with help of which the sales “are protected”. Based on the aggregate demand of all selling spots, the target stock levels of each SKU are estimated and formed in the warehouse, which are called the buffers. These levels consider delivery time and minimal production lot for each SKU. Thanks to such “protection”, the response time to demand is increased and stock level is considerably decreased in the system.
Implementation of the “pull” system is a win-win for everybody: either for a client, who will always find the necessary product and vote with money or for the business that will increase sales, accrue profits and furthermore does not block the circulating money in the slow-selling goods!
We will tell more information about how to implement such system during our online-demonstratoin.
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“How to manage stock proactively basing on the Theory of Constraints” in order to:
- Figure out and estimate which damages and losses of sales does company suffer from because of incorrect sales forecast and stock management according to the “extruding” method. Find out how to fix them.
- Get step-by-step plan of transfer to implementation of the “extraction” system of stock management.
Demonstration is of current interest for the companies in the sphere of retail, distribution, and production.