The term overstock refers to a situation where the stocks of raw materials and finished products stored in the warehouse are in excess of demand. In this context, inputs (incoming products) exceed outputs (outgoing products), converting the warehouse into a bottleneck. In other words, it is the opposite scenario to stock-outs, where stocks are depleted and not accumulated. Getting rid of this can be difficult.
If you’re in this predicament, visit stocksolutions.com.au, one of the best solutions for the surplus stock in your business. But why is excess stock generated? Several factors can cause extra stock. Ineffective inventory planning usually hides behind an overstock, often accompanied by poor coordination between the sales, logistics, and production departments. Another factor contributing to excess inventory is the miscalculation of product turnover.
The causes can also be linked to the type of operation of a warehouse. For example, it is easier for overstock to form in those logistics facilities that supply or store products made in a chain. In short, the factors are many. To those just listed, you can add the seasonality of certain products, the reputation of the brand, the entry of new players in the market, or the deterioration of the socio-economic conditions of a specific sector. The external and internal factors that result in overstocking can be easily avoided.
How to Avoid Excess Stock
Excess stock can also be avoided by choosing intralogistics solutions that guarantee maximum warehouse efficiency and productivity. Although every company has special needs, these three can be considered strategies applicable in most logistics contexts to reduce excess stock:
Implementing a Warehouse Management System
A digital tool such as warehouse management software allows you to predict the necessary inventory more accurately based on the demand for each SKU (stock keeping unit). The software optimizes the company’s workflow, avoids overstock situations, and assigns slots to products while elaborating the most efficient picking paths. It is, therefore, an effective system to maximize plant productivity.
Selection of Adequate Storage Systems
The warehouse must focus on solutions that adapt to the real needs of the company. When product rotation is not a priority, drive-in racks can be used to gain capacity, avoiding the risk of overstock.
Optimized Working Methods
Excess stocks can be reduced with management models such as just-in-time or the logistic strategy of cross-docking with which the storage of goods is bypassed. Both models allow you to do without large quantities of references.
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