Guide to improve stock management and logistics warehousing

Stock and warehouse management is one of the most important issues to take into account in logistics solutions because with a good stock management strategy you can save a lot of costs and multiply your profits. For this reason, FM Logistic would like to explain how to improve inventory management and logistics warehouses.

According to the RAE, the term stock corresponds to an Anglo-Saxon term that refers to the stock available in a logistics warehouse. Also important in relation to this concept is the meaning of SKU, which corresponds to the abbreviation of stock-keeping unit. SKUs are unique codes made up of numbers and letters that detail the characteristics of each product in order to be able to keep control of warehouses.

Stock control refers to the global calculation of the products available in a logistics warehouse. Stock and inventory management is related to the organisation of the different flows of materials in a warehouse and, finally, when we talk about stock optimisation, we refer to the work aimed at improving the performance of the stored stock.

Inventory management encompasses several processes. On the one hand, it encompasses the task of warehouse control in order to always have stock available for all types of orders placed by suppliers or end customers; the optimisation and classification of stock together with the guarantee of product safety and the capacity to carry out stock management when products are actually removed from the warehouse.

Warehouse control or stock control refers to the tasks that a logistics company performs in order to organise, plan and control the stock of products within a warehouse so that whenever a customer makes a purchase, the order can be handled within the established time.

When we talk about stock optimisation, we are referring to knowing how to manage and achieve a complete availability of the products that are in demand without the need to have a large number of products that are not going to be sold in the short term and that we will be storing without a real need and planning and that create an unnecessary investment in inventory management.

We must know which customers we work with and the level of demand for the products in our warehouse. A product that is in high demand every day and month of the year is not the same as a product that is related to a specific season and which we do not necessarily have available all year round. It is necessary to have a correct knowledge of product demand forecasts in order to achieve correct stock management.

A good quality service makes a difference to the consumer or end customer. If we have a good service, correct stock management, safe packaging and warehousing, the goods will arrive at their destination in optimum conditions, without breakages and within the stipulated time.

Today, the world is driven by immediacy and consumers are increasingly demanding faster and more environmentally responsible deliveries. Similarly, omni-channel logistics plays a key role in our lives. Many customers buy a product online and return it in shop or vice versa. Logistics operators must be prepared for this shift in consumer shopping preferences and have the right stock control in place.

To achieve this goal, more and more logistics operators are using cross docking or just-in-time strategies. The aim is to adjust the inventory stock in the warehouses as much as possible without reducing the quality of the work.

The products in the warehouse have neither the same economic value nor the same frequency of sale. For this reason, it is important to have them classified using management techniques that analyse the aforementioned values. The most commonly used is the “ABC” technique.

Just-in-time corresponds to the “on-demand” mode. This means that the product is manufactured and delivered to the end consumer when the purchase is made. An example of this type is vehicles. In the past, dealers used to keep vehicles in stock, but more and more of them are being manufactured as they are sold.

This is a form of selling used in the retail sector. This concept refers to when a seller does not have the product he is selling in stock and it has been purchased by a consumer. At the time of post-sale, the seller informs the manufacturer about the orders and the manufacturer prepares them for the seller to deliver them to the final consumer.

This term refers to the goods that enter the warehouse and are not stored at any time because they are placed in another lorry that is going to leave with goods. The only storage that may exist are areas within the warehouse where the stock that is about to leave is stacked, sorted and managed.

This method relates to bulk shipments. Bulk shipments result in less need for inventory replenishment and minimal stock management and warehousing. Bulk shipping is one of the most widely used methods of stock management in the industry.

FEFO (First Expires, First Out) is a stock management technique in which logistics companies manage the expiry dates or key values of the product in order to ship according to these characteristics.

FIFO (First In, First Out) is a stock management technique in which logistics companies manage the movement or key values of product for shipment according to time criteria.

This method of stock and inventory management is aimed at small companies. It consists of placing a smaller number of orders with a larger quantity of product in each one of them.

Inventory and warehouse management always have a minimum of products available in the warehouse. This stock classification technique is due to those companies that will only place a new order when they reach this minimum stock in their warehouse. In this way, products will always be available.

If, due to demand, production or storage circumstances, products are out of date or defective, the following procedure shall apply:

In each warehouse there must be a designated area for goods that are out of date, defective, blocked due to quality or any other requirement that has been agreed between the customer and the logistics operator.

When goods become “unfit“, they are moved to the aforementioned areas. Once the product is in this area, its final status is analysed and defined according to quality criteria. After that, it can be destined for destruction, shelf life extension, donation, quarantine, or any other status that has been agreed between the client and the logistics operator.

This case is the most common and yet the most damaging for the producer companies as the product must be recycled according to current regulations.

Recycling means that the product is destroyed, compacted, inertised or any other method by which it is taken out of the supply chain and is no longer suitable for use and consumption. It prevents the producer and customer from incurring significant economic losses due to the loss and destruction of goods and reduces the amount of waste and residues.

There are some changes in stock and inventory management that can be foreseen such as products related to certain times of the year or products that are in demand every month regardless of the dates. But there is one trend that cannot be controlled and that is “fads” or certain peaks in demand without any justified cause. For example, there are products that multiply exponentially because they are promoted by an “influencer” or opinion leader and all logistics operators have to know how to deal with these circumstances.

The capacity of the available stock must be in harmony with the production order and with the sales of each product. Just as we have said that insufficient stock can lead to delays in the delivery of these articles with the consequent risk of losing customers; an excess of stock can lead to very large economic losses due to the unnecessary purchase of some products that may expire without having been sold and an increase in storage costs.

This process coincides with the tracking of the different phases and processes followed by the products in stock. For example, when we move goods from one warehouse to another or when certain products we have in stock are sold. All these processes have to be well recorded at all times.

It is important to know what is “in” in the market or what is commonly bought. Trends can change from year to year or seasonally. An example we have seen in recent years coincides with the COVID-19 pandemic. We can observe how ecommerce had an exponential leap and the sales of staple products multiplied.

It is therefore essential for good warehouse management to anticipate and forecast market trends. It is necessary to take into account the products that are most in demand by season, assess sales from other years, observe whether the product is constantly growing, know the year-on-year deviations, promotions and advertising investment.