It’s tempting to fill up your warehouse storage with as much stock as possible to meet customer demand and ensure that you never run out of products to sell.
But is that a good idea?
It sounds easy, but the easy route is not always the most efficient nor is it the most cost-effective.
Efficient stock control is at the heart of any successful retail operation. If you want your business to thrive, having the right products in the right quantities at the right time is important.
And yet, stock control remains a common challenge for online retailers. The most common issues that businesses run into include stockouts, overstocking, and slow-moving inventory. This can cause awful setbacks. So if your business wants to maximise efficiency, stock control should stay at the top of your list.
This article explores proven techniques for achieving better control over inventory to help you meet customer needs while enhancing operational efficiency and profitability.
What is Stock Control?
Stock control is also known as an inventory control system. It involves the processes and systems used to manage stock levels, and maintaining enough stock to meet customer demand.
Effective stock control systems are especially important to online retailers given the rapid pace of online transactions and the high expectations surrounding order fulfilment process.
At its core, stock control balances supply and demand and you need it to ensure customer satisfaction, cash flow optimisation, and save money on storage costs.
The Key Components of an Effective Stock Control System
Creating an efficient stock control system entails focusing on specific components that collectively streamline inventory management and prevent costly errors.
Each component plays a role in building a robust stock control system that keeps products flowing efficiently from warehouse to customer. When these elements are balanced, e-commerce businesses can effectively manage inventory, reduce costs, and improve service.
These key components are:
1. Inventory Tracking
A precise count of stock levels is important. Inventory tracking prevents stockouts, enables order fulfilment, and ensures accurate records of stock on hand. In an e-commerce business, real-time tracking enables up-to-the-minute inventory accuracy to help you avoid overselling or disappointing customers with unavailable items.
2. Demand Forecasting
By forecasting future demand, your business can plan the right number of stock levels based on anticipated sales patterns.
Analysing past sales data, seasonality, and market trends can help you predict demand more accurately. It lessens the likelihood of overstocking or running out of popular items. For e-commerce retailers, accurate forecasting directly translates to lower storage costs and better customer satisfaction.
3. Reorder Points
A reorder point is the stock level at which new inventory should be ordered to prevent running out. This threshold differs depending on sales velocity and lead times from suppliers.
e-commerce businesses with reliable reorder points can maintain smooth operations and avoid unexpected delays in fulfilling customer orders. Hence, setting reorder points is important for managing restocks without overstocking.
4. Safety Stock
Think of safety stock as a buffer that protects your business against unexpected spikes in demand or supply chain disruptions.By having safety stock on hand, you ensure that there’s always enough stock available to meet sudden demand or delays in replenishment.
It may increase holding costs slightly, but safety stock helps maintain customer satisfaction by keeping products available even in uncertain times.
5. Stock Audits
A regular stock audit ensures that actual stock levels match recorded levels. With an accurate audit, you can identify discrepancies that can happen due to theft, damage, or counting errors. For online retailers, these audits help maintain data accuracy.
The end result is better inventory management decisions and customer demand that is reliably met.
6 Common Stock Control Methods and Techniques
We’ve established that running a successful business is all about having the right products and the right time. Stock control, when mastered, can prevent the all-too-common dangers of overstocking and stockouts.
1. The Just-In-Time Approach
JIT is a lean inventory strategy that involves keeping minimal stock on hand and ordering only when there’s demand. The goal is to achieve a high volume production with less on-hand inventory to reduce costs and eliminate waste.
However, JIT does require strong relationships with reliable suppliers. They need to be able to deliver quickly, as any supply chain disruption can lead to stockouts.
JIT is great for businesses with stable demand and reliable suppliers, but it may pose risks for those experiencing unpredictable demand spikes.
2. The Push Strategy
This strategy is all about anticipating demand. It involves analysing historical sales data to predict the volume of product needed before demand starts to surge..
For instance, an e-commerce seller that specialises in selling holiday decor. By analysing sales data from previous years, they can predict the surge in demand for festive items in the current year. They, in turn, push the stock into their inventory in anticipation of the holiday spike.
3. ABC Analysis
ABC Analysis categorises inventory into three categories — A, B, and C — based on value and importance.
- Class A is for high-value items that significantly impact revenue and will require closer monitoring.
- Class B are for items of moderate value
- Class C includes lower-value items that don’t need as frequent attention.
By focusing on high-value items, businesses can allocate resources efficiently and prioritise stock that has the most impact on profitability.
4. Economic Order Quantity (EOQ) Model
The EOQ model is a formula-based approach. It strategically balances the fine line between ordering too much and too little. In order to successfully calculate EOQ, you must consider annual demand rate, ordering costs, and the holding cost per unit per annum.
It’s useful for calculating restock amounts and EOQ requires accurate demand and cost data, making it best suited for businesses with steady, predictable sales patterns.
5. The FIFO Method
FIFO is a stock control system that works under the principle of older stock being sold first before newer stock comes in. This approach is mostly used for perishable goods and products with shelf lives, because it lessens the risk of spoilage.
You can also maintain an organised stock flow more easily as it ensures that that older inventory doesn’t go to waste. e-commerce retailers handling perishable goods or items with a limited shelf life can benefit significantly from FIFO.
6. Batch Tracking
For products that are produced or received in groups, batch tracking is a popular stock control system. You can do better quality control with batch tracking as it’s easier to trace items in the event of recalls or defects.
For an e-commerce business that does health, beauty, or food products, batch tracking can help maintain customer safety and compliance with industry standards.
Analysing Your Current Stock Control System
Part of maximising the efficiency of your stock control system is evaluating your current process to spot inefficiencies and identify areas for improvement.
Here’s our step-by-step guide to assess the effectiveness of your current stock control and help you make informed adjustments.
Step 1: Review Inventory Turnover Rates
Inventory turnover is the rate at which stock is sold and replaced over a given period. High inventory turnover rates are a sign that stock levels align well with customer demand, and a low turnover rate may suggest overstocking or slow-moving items.
Calculating turnover for different product categories helps you better understand product demand and make more accurate stocking decisions.
Step 2: Analyse Stockout Occurrences
Frequent stockouts are a red flag. It potentially points to issues in forecasting or reorder points. Reviewing stockout history helps you identify products that consistently run out of stock and pinpoint when demand was not met. By analysing these patterns, you can fine-tune your reorder points to prevent future stockouts.
Step 3: Evaluate Lead Times
Lead time is the period between placing an order with a supplier and receiving the stock. Longer lead times can lead to stock shortages, so it’s important to evaluate supplier reliability.
Make sure you’re factoring in lead time accurately in your ordering decisions. If certain suppliers frequently delay orders, try to find alternative sources or adjusting reorder points to account for extended lead times.
Step 4: Assess Order Accuracy and Fulfilment
Order accuracy and fulfilment rates are indicators of the reliability of your stock control system. Errors in order picking and packing, or shipment can result in customer dissatisfaction.
Reviewing order fulfilment data can help you identify whether inventory or stock control errors are affecting your business’s ability to deliver on time and accurately.
Step 5: Check for Dead Stock
Dead stock is inventory that hasn’t sold for a long time and may no longer be in demand. Holding onto unsold items can tie up capital and take up valuable storage space. By analysing deadstock, you can decide on markdowns, discounts, or returns to suppliers and prevent overstocking of low-demand items in the future.
Step 6: Identify Seasonal Trends
e-commerce businesses often experience seasonal peaks and troughs.
Looking into seasonal trends can provide insights into when stock needs to be adjusted to meet fluctuating demand. Reviewing your sales data across different seasons can also help you plan ahead for promotions and stock allocations during peak times, such as holidays or special events.
Strategies for Improving Stock Control Efficiency
Inefficient stock control entails losing money on potential sales that can’t be filled or by stocking too much of one product. Some strategies that you can implement to improve your stock control systems are:
- Accurate forecasting: Efficient stock control includes the ability to accurately predict demand. When projecting future sales, consider the current trends in the market, the previous year’s sales during the same week, this year’s growth rate, the overall economy, any upcoming promotions, and any planned spending on advertising.
- Highlight the best sellers: Items that sell in high volumes should go near the shipping area. This way, the warehouse staff can easily access the item and it will save everyone a lot of time and effort.
- Inspect stock regularly: Don’t wait for end-of-year to do a physical inventory count. By this time, there may already be too many errors, and resolving them can be overwhelming. Instead, perform cycle counts on a more regular basis.
- Don’t ignore slow moving and obsolete items: The longer these items stay unused on your shelves, the more space they take up. They also use up labour and resources, and if left alone for too long, they can even end up getting in the way of your more popular items. Consider putting these items on sale or turn them into add-ons for related products.
- Communicate with your suppliers: Your suppliers can help notify you of potential shortages of products. It will let you find solutions to meet customer demands in advance.
How Technology is Shaping an Efficient Inventory and Stock Control System
Thanks to advancements in technology, stock control isn’t as daunting as it appears. Nowadays, it’s more accurate and less labour-intensive. Key technologies that are often used are:
1. Inventory Management Software
All stock-related data is centralised in an inventory management software. It gives your business a clear view of its inventory levels, reorder points, and sales trends.
Most of these platforms often include features like automatic reordering, sales forecasting, and tracking across multiple sales channels. For e-commerce businesses, integrating inventory management software can streamline order processing, reduce stock discrepancies, and improve stock availability. The features ultimately contribute to better customer satisfaction.
2. Barcode Scanners
Barcode scanning systems simplify stock control. It allows instant and accurate recording of product details during inventory checks, order picking, and receiving.
This automation reduces the likelihood of human error in manual data entry and speeds up the time required for inventory audits. Barcode scanners are particularly useful for businesses with high product turnover or extensive inventories, as they enable fast, real-time updates on stock levels.
3. RFID (Radio-Frequency Identification)
RFID technology uses radio waves to identify and track items equipped with RFID tags. Unlike barcode scanners, RFID readers don’t require direct line-of-sight. This means you can scan items in bulk faster.
RFID can help e-commerce businesses improve inventory accuracy, prevent theft, and track items throughout the supply chain. But because RFID systems are usually expensive, they are often a better fit for larger operations with complex inventory needs.
4. Cloud-based Solutions
Cloud-based stock control solutions, like our own software — Green Portal, enables real-time access to inventory data from any location as long as there’s an internet connection.
Cloud-based tech offers flexibility and accessibility, plus it lets businesses manage stock across multiple locations, collaborate with suppliers, and scale operations. They can usually be easily integrated with other business tools too.
They can be configured to work in sync with e-commerce platforms, order management systems, and accounting software, so it makes them one of the most ideal solutions for a fast-growing e-commerce business.
5. AI and Machine Learning
Artificial intelligence (AI) and machine learning are increasingly used in stock control for demand forecasting. They’re good at predicting future stock needs based on historical sales data and trends.
Technologies like this can help you optimise inventory levels, prevent stockouts, and reduce overstock by adjusting stock levels dynamically.
For e-commerce businesses facing fluctuating demand, AI-driven insights can significantly improve inventory accuracy and customer satisfaction.
Benefits and Considerations for Implementing Stock Control Software for Your Business
Now that we’ve established how helpful technology can be in creating an efficient inventory control system, consider implementing stock control software for your business. The right software can help you manage inventory more precisely and efficiently, and with more control.
Other benefits are:
- Improved accuracy. Stock control software automates many manual processes and it reduces the likelihood of human error.
- Time savings. These types of software automate repetitive tasks and significantly reduce time spent on routine activities. It leaves you more room for strategic tasks like demand forecasting or sales planning.
- Better inventory visibility. Most stock control systems provide a comprehensive view of inventory across multiple locations and channels. This level of visibility helps monitor stock levels and identify bottlenecks to allow for timely interventions.
- Streamlined reordering. Stock control software often includes automated reorder features. It alerts you when items reach their reorder points and helps ensure consistent stock availability.
- Data-driven decision making. Thanks to real-time data, you can make informed decisions about inventory management. Advanced analytics within the software highlight trends in sales, demand fluctuations, and supplier performance.
- Scalability. Lots of stock control software solutions allow you to increase capacity, integrate new sales channels, or add storage locations.
And to find the right stock control software, you need to judge software based on:
- Scalability and Flexibility: Can the software scale as your business expands? Look for systems that accommodate increased SKUs, support multiple warehouses, and easily integrate new sales channels.
- User-friendliness: To ensure a smooth adoption by your team, the software needs to be intuitive, must have an easy-to-navigate interface, and minimise training time while helping employees make the most of the system.
- Seamless Integration with Other Systems: Does the software integrate with existing e-commerce platforms, accounting software, and CRM systems? This connectivity is useful for synchronising inventory data across platforms, and providing a unified view of your entire operation.
- Cost vs. Value: Assess the cost in relation to the software’s features and potential ROI. Think about both upfront costs and recurring fees and evaluate the software’s ability to enhance efficiency, reduce inventory costs, and support growth.
- Customisation Options: Businesses have unique inventory needs. Customisable features can help address specific requirements.
- Data Security: Does it protect sensitive inventory and sales data? Prioritise software with strong security protocols. Go for software with data encryption and regular backups and make sure the provider’s security measures to ensure they meet industry standards.
The Impact of a Stock Control Program on Business Profitability
Effective stock control is directly linked to a business’s profitability.
When you manage inventory efficiently, you can meet customer demand, lessen the unnecessary costs, and ultimately boost your bottom line. And in today’s competitive market, striking a balance between maintaining optimal stock levels and minimising expenses is important if you want profitability and growth.
1. Cost Reduction through Efficient Stock Management
There are many cost benefits to be had when businesses implement effective stock control. By avoiding overstocking, your business can:
- Stop cash from being tied up in excess inventory that may become obsolete or unsellable. Reduce the risk of lost sales.
- Maintain steady revenue without missing out on potential opportunities.
- Minimise warehousing costs. This also leads to efficient storage — meaning there’s less space required for excess goods, and it cuts down on rental, utility, and handling costs.
- Save on labour costs associated with manual inventory tracking.
2. Enhancing Customer Loyalty and Satisfaction
Stock control plays a significant role in customer satisfaction as this is crucial for building loyalty and repeat business.
When your business can reliably fulfil orders without delays, your customers would appreciate the positive experience and it encourages them to return. Consistently available stock and timely order fulfilment fosters trust and reliability.
Plus, a streamlined inventory management lets businesses respond flexibly to seasonal demand changes or sudden shifts in customer preferences.
3. Maximising Profit Margins through Data-Driven Stock Control
Effective stock control is more than just about managing current inventory — it’s also about leveraging data to make smarter purchasing and stocking decisions.
A thorough analysis of sales patterns, demand forecasts, and product turnovers let you optimise stock levels for each product. This approach lessens the risk of markdowns on slow-moving items, maximises sales of popular products, and helps maintain healthy profit margins.
Final Thoughts
Controlling stock can be tricky if you’re doing it by yourself, but with the right support technology and resources, you can make better decisions that will benefit your business.
And if you need additional support, you can always reach out to Green Fulfilment for help in scaling your business while saving time and money.