Automating Stock Reorder Levels
There are several reasons for the need of an efficient, accurate and easy to run stock reorder system. One important reason is that by accurately identifying the minimum amount of stock needed to run an operation you can significantly reduce the volume of your stock and therefore your cash flow. As second reason is that you do not want to lose customers to the competition because of stock outs. A third is that you want to minimise your stock holding and avoid tying up unnecessary capital in too much stock . So how to achieve this?
In order to reduce the amount of each stock line to its minimum you need to base your minimum stock levels on a historical analysis of sales and a projection into the future of how those sales might increase or decrease for each individual stock line. So input from the sales department is vital for the future projections about the main basis must be taken from historical analysis taking the downward or upward trend for each stock line as your main analysis tool.
Once you have defined this you can set or reset each individual stock level and set warning flags within your stock control system to identify the points in time when you should be reordering those stock items in order to replenish the levels.
This means that within your system you need stock levels and minimum stock levels to be displayed simultaneously and warning flags against those which are falling dangerously low. You also need to take into account the time it takes to reorder a particular stock item and that will depend on the standard delivery time that it takes between identifying the need to order and the time the goods are then delivered into the warehouse. Sometimes customer orders peak unexpectedly and create potential bottlenecks for certain stock items. This will possibly mean that In some cases you will need to order from a different supplier if, although the price is a little higher, the delivery time is paramount in the particular situation.
The system you empty therefore depends on continual analysis of your transaction history both for good in and goods out. First take a long term analysis over the last couple of years then a closer analysis by month to show seasonal trends, and then adjust your minimum stock levels accordingly.