- Categorise your stock
- Invest in a financial management system to track your stock
- Conduct rolling stock takes through the year
- Clear excess stock
Stock control fundamentals
James Wall from Gardenworld Nursery in Keysborough is passionate about stock control. He's passionate about gardening as well, but in his view poor stock control can destroy a business.
James's early career, working in his parents' wholesale plant business exposed him to the critical elements of good stock control. Back in those days all the information was kept in a spreadsheet. However, it still allowed James to view stock fluctuations over a long period (up to two years) and plan their growth around typical demand trends.
James says one of the most important aspects of stock is the way it is classified and he uses three categories.
Best seller products
Getting the stock in this category right is actually quite easy as if you over order you will soon use the excess product up. The worst thing here is to run out of this stock. This stock may typically be 10% of your SKUs (stock keeping unit).
Bread and butter products
This stock may be 80% of your SKUs. These are the ones in the middle, and this is where the major difference in cash flow can occur by smoothing out the peaks and troughs. Having all these products available dramatically increases sales, but ordering only just enough of each and just in time, can substantially reduce your total stock holding. These middle SKUs are the ones to focus on.
Obscure but got-to-have sellers
This stock is slow moving and only makes up less than 10% of James's total SKUs, but he says they are usually required as part of your total offering. An example of this may be offering an unusual vegetable seedling like kale, because Gardenworld is known for having the biggest range of vegetable seedlings. This may vary depending on whether you are a boutique store known for obscure items.
Stock control financial management system
A sound financial management system is crucial. Gardenworld uses Optimizer by PacSoft which is commonly used in the hardware industry. What a good financial management system will give your business is trends and historical data to base your future purchasing decisions on. Good technology also ensures human error is reduced and time to stocktake is reduced. The reporting capability of your financial management system is important and should offer you the flexibility to customise. Modern systems like Optimizer can actually analyse and then suggest what you order from a particular supplier.
How to conduct a rolling stocktake
James believes firmly in conducting a rolling stocktake. This means he doesn't need to do an annual stocktake but monitors stock on a monthly basis, choosing a different category each month. This means changing habits to stocktake regularly rather than all at once. It can also mean finding problems or opportunities months before he otherwise would have.
Tracking stock value
It's good practice to set a specific dollar amount for the value of your stock. James does this as a matter of course and makes sure that the value of Gardenworld's stock never significantly exceeds this amount. If there is a problem, he can drill down through departments and find problem products to put his attention to.
Tracking and clearing excess stock
At Gardenworld excess stock is disposed of two ways. If the stock is seasonable and perishable – which most of Gardenworld's stock is – then it is monitored over a set period. As its popularity diminishes James begins to special it off, sometimes using an aggressive sales campaign. Some non-perishable stock can either be removed from sale and reintroduced the following year or 'specialed off'.
Stock is considered an asset and part of the profits of your business so it is important to keep on top of stock that is not moving. James says face the problem and either sell below cost or write the stock off. To prevent or reduce the likelihood of dead stock James says monitor regularly, observe buying trends through accurate reporting and keep the value of your stock under control.
James's advice is simple – make sure you employ staff who share your stock management philosophy and the housekeeping rules that need to be followed – their adherence to your approach will be crucial.