Maintaining an optimal level of merchandise at the warehouse

Maintaining an optimal level of merchandise at the warehouse

June 22, 2015

warehouse.pngAn optimal level of merchandise has to be maintained at the warehouse in order to avoid both a deficit and overflow.

A good manager pays extra attention to the detailed organization of the company’s warehouse. He keeps his hand on the pulse of the company's input and output, because it directly affects the potential profits. He knows that personnel can be motivated by disciplined and orderly work conditions with a minimal loss; and meticulous work makes customers come back to you again and again.

How do you make sure that your warehouse is sufficiently stocked, and you are ready to satisfy all the orders? Usually managers turn to expanding, which leads to tied-up capital while the top managers are trying to cut costs and increase liquidity. It’s a daily dilemma of attempting a balancing act! HandiFox provides you with effective tools for your data integration and helps you find optimal solutions for the said balancing act.

After up-grading your safety stock levels for every single item in your warehouse, HandiFox can help you get your orders in organized and optimize your logistical decisions by analyzing the warehouse data history for you. It is vital to the supply and delivery process to have the right data management system. This software will optimize the merchandise processes at your warehouse and reduce inventory levels while making product availability higher. It makes easy the manager’s job of deciding on an inventory level that balances the risk of running out of products with storage costs and other negative aspects of holding too much inventory. In essence you can run lean while avoiding unnecessary risks.

Factors that affect the demand of goods

1. Seasonal shifts

One of the downsides of stocking up with a lot of inventory is that certain goods might remain unsold, sitting on the shelves due to the fluctuations in market demand. Let’s say, a warehouse that is keeping too many winter coats during the winter may not manage to get rid of the winter coats before spring. During the spring, consumers might demand different types of clothing, and the company will be left with a large quantity of goods that take up space.

2. Consumer tastes and trends

Not only seasonal shifts may determine the demand of goods, but also consumer tastes and trends may have an influence on the demand of the product you are stocking. Holidays are a huge factor, when certain products come in demand once a year or once in a century. One year there may be a huge spike in demand for stuffed old-fashioned toys, and another year there is a toy robot trending. Changes in consumer tastes and trends can affect how high demand turns out to be for a certain product.

3. Economic situation

With crisis after crisis, continuously fluctuating employment rates may have an effect on whether your product is in demand or not. If you’ve stocked up on a lot of high prices luxury items, you may face the risk of a drop in demand of your product in case of unemployment rates rising. If, on the contrary, those rates drop and more people have a higher disposable income, more potential clients would be ready to spend on luxury items, like expensive furniture or designer clothes.

4. Price changes

Changes in demand are susceptible to price shifts. When the prices go up to the level where fewer customers are able to afford a particular item, people will avoid buying this product and demand will, naturally, drop. On the contrary, if the price of a certain product goes down, then more people will probably buy it and demand will rise.

Still there is another important factor to take into consideration when estimating the risks of having an excess or shortage of goods: the size of your customer base. Your customer base may increase in case of baby booms and customer class rise in standard of living. Changes in market size may have a sudden effect on demand and supply issue when an interest in complimentary goods such as shampoo and baby lotion rises, making them rather a necessary item rather than an optional one. An even larger increase in demand may occur if the product in question is a necessity rather than a luxury item. When the population grows, the demand for commodity goods also grows.

How to predict the demand of goods

All the factors above influence the demand curve and you may want to keep an eye on the trends. To tell you the truth, there is no flawless formula for predicting what your customers will order tomorrow. Building an integral demand forecast is never an easy job with ERP floods of information, number of items in the warehouse constantly expanding, other departments making things more difficult with their input, thus you run the risk of never coming up with the final strategy.

How do you create an efficient demand prediction process and achieve optimal planning accuracy without overspending on forecast analysis? How do you integrate the forecasts from all the department managers into one reliable plan?

First of all, you must understand and collect all the factors that have an influence on demand, whether it’s marketing or sales influencing it through pricing and promotion activity or some other factor.

Second of all, your data must be accurate and as close to the true demand as possible.

Third of all, it is necessary to keep in check your forecasting methods by sorting out the data inputs.

The flexible mechanism of Purchase Order generation in HandiFox software can help you avoid both shortage and excess of goods at the warehouse. It helps predict future shifts in demand of a certain product.

Refined methods of forecasting are available with Purchase Order management which makes it simple and transparent with HandiFox software.

Click on the reference below to get more information on HandiFox Purchase Order: Purchase order management is simple with HandiFox software!