[.blue]Mastering stock control & inventory management:[.blue] An essential guide for eCommerce success

July 21, 2023

min read

Welcome to our comprehensive blog post on the subjects of stock control and inventory management.

Both concepts are essential for successful eCommerce operations. In this in-depth discussion, we delve into the definition of stock control, the importance of inventory management, the concept of stock consignment, the role of the inventory turnover ratio, and strategies for effective management. So, sit back and prepare to unlock the power of stock control!

What is stock control?

Stock control, or inventory control, refers to the process of managing stock levels to minimise costs while meeting customer demand. It's an intricate balancing act involving the accurate timing of ordering, storing, using, and selling stock to prevent shortages or a surplus.

In the eCommerce sector, mastering stock control is a strategic move towards achieving optimal profitability and customer satisfaction. By accurately estimating how much stock you need, you can manage cash flow effectively and reduce storage costs. Furthermore, with proper stock control, you ensure the availability of products when customers need them, which can significantly enhance customer satisfaction and retention.

But it's not just about having enough items to meet demand. Stock control also involves managing the life cycle of products to avoid obsolescence. In today's fast-paced eCommerce environment, trends change rapidly. Without proper stock control, you risk being stuck with outdated products that you can't sell.

The role of stock control in eCommerce also extends to your relationships with suppliers. Effective stock control requires open and effective communication with suppliers to ensure you can adjust your stock levels quickly in response to changes in demand. For example, if a particular product suddenly becomes popular, you need to be able to order more from your supplier quickly to meet the increased demand. Conversely, if a product's popularity declines, you need to be able to reduce your orders to avoid overstocking.

Finally, stock control is integral to your business' financial health. The cost of holding stock, also known as carrying costs, includes storage, insurance, and potential obsolescence. By managing your stock levels effectively, you can minimise these costs and improve your overall profitability.

Why is stock control important?  

Stock control plays a critical role in business operations. It's the key to avoiding overstocking or understocking, both of which have consequences.

Overstocking means you have more stock than you need. It ties up capital that could be used elsewhere in your business. Moreover, overstocked items may become obsolete or spoil before they can be sold, leading to wasted resources that have both a commercial and environmental impact.

On the other hand, understocking means you don't have enough stock to meet demand. This can result in missed sales opportunities and unhappy customers, as they can't buy what they want when they want it.

Effective stock control prevents both of these situations. By ensuring you have the right amount of stock at the right time, you can meet customer demand while avoiding unnecessary costs. This not only boosts your profitability but also enhances customer satisfaction by ensuring they can always find the products they want.

Furthermore, stock control impacts cash flow. Money tied up in excess stock is money that can't be used elsewhere in your business. By controlling your stock levels, you can free up cash for other important areas, such as marketing or expansion.

Finally, stock control aids in demand planning and forecasting. By keeping track of your stock levels and how quickly items sell, you can make more accurate predictions about future demand. This can help you plan your orders more effectively and avoid potential issues.

Defining stock consignment  

Stock consignment is a business model where a supplier (the consignor) provides goods to a retailer (the consignee), but the supplier retains ownership of the goods until they are sold. This arrangement can be advantageous for both parties.

For retailers, stock consignment reduces the risk of being left with unsold inventory. They only pay for the stock once it sells, meaning they don't have to outlay capital upfront for products that might not sell. This can be particularly beneficial for smaller retailers or start-ups with limited capital.

For suppliers, while stock consignment does carry more risk, it can also offer significant benefits. It can be a valuable way to introduce new products into the market or to unload surplus inventory. Furthermore, it can help strengthen relationships with retailers, as they are likely to appreciate the reduced financial risk and increased flexibility that consignment offers.

However, for stock consignment to work effectively, strong communication and trust between the supplier and retailer are crucial. Both parties need to be clear on the terms of the consignment agreement, including when and how payment will be made, who is responsible for lost or damaged stock, and how unsold inventory will be handled.

Inventory turnover ratio: What is it?  

The inventory turnover ratio is a key performance indicator that measures how often a business sells and replaces its inventory within a certain period. Essentially, it indicates how quickly you're selling your stock.

A high inventory turnover ratio can be a good sign. It suggests you're selling your products quickly, which can lead to increased sales and profits. It also indicates that you're not tying up too much capital in unsold stock.

Conversely, a low inventory turnover ratio can indicate problems. It may suggest that you're not selling your products quickly enough, which could mean you're holding too much stock. This can tie up capital and increase the risk of obsolescence or spoilage.

However, what constitutes a "good" inventory turnover ratio can vary depending on the industry and the specific business. For example, a grocery store, which sells perishable goods, would likely aim for a much higher turnover ratio than a car dealership.

Strategies for effective stock control & inventory management  

There are several strategies you can employ to improve your stock control and inventory management. One of the most effective is accurate demand forecasting. By analysing historical sales data, market trends, and customer behaviour, you can predict future sales and adjust your stock levels accordingly.

Regular stock reviews are also important. By routinely checking your stock levels, you can identify potential issues before they become problems. If you notice that a particular item is selling faster than expected, you can order more to prevent a stockout. If an item isn't selling, you might decide to run a promotion to move the stock more quickly.

Another crucial strategy is efficient supplier management. The relationships you build with your suppliers can have a big impact on your stock control. If you have a good relationship with a supplier, they may be more willing to work with you to adjust delivery times or order quantities to better suit your needs.

Lastly, utilising a stock control system can greatly enhance your inventory management. A system like Zendportal can provide real-time insights into your inventory levels, enabling you to make quick, informed decisions. It can also help you analyse sales trends and forecast demand more accurately.

In conclusion, mastering stock control and inventory management are essential components of running a successful eCommerce business. These practices ensure you have the right amount of stock at the right time to meet customer demand, while also keeping costs in check. With the right strategies and tools, you can turn your inventory management into a competitive advantage.

Zendbox is here to assist with your fulfilment, storage, and inventory control needs. Reach out to one of our fulfilment experts today to find out more.

Alex Borg
Director of Operations at Zendbox

Alex is responsible for overseeing the day-to-day operations at Zendbox, ensuring accurate and timely order processing, picking, packing, and shipping. He collaborates closely with other teams across the business to meet customer expectations and achieve stringent service level agreements (SLAs).

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