You may have heard that planning is the key to success. When done well, it can help a company grow. On the other hand, when done carelessly, it can cause major problems. One of them is excess inventory.
A very common mistake that some companies make is stock more products than they need. And this can happen for several reasons, while communication between the purchasing and sales departments can be one of the keys to solving excess stock problems.
Do you know how excess inventory can harm a company's day-to-day operations? And, most importantly, how to avoid it?
So, today, on the Bertolini Storage Systems blog we will explain everything about this topic. Enjoy your reading!
What is excess inventory?
First of all, we need to understand what excess inventory is and how it is currently characterized within companies. The concept is characterized by a storage greater than demand.
For example, if a company has a product turnover low per month, there is no point in having an extremely full stock. This means poor planning and brings huge financial losses to the company.
What can generate excess stock?
Now that we understand what excess inventory is, let's show what can cause this problem.
Lack of Communication
For a company to be able to move forward, it is necessary that all sectors are aligned with each other. For example, if the purchasing department doesn't know what the sales turnover is like, they will end up buying more than they should. This creates problems for the sales team, who will have unrealistic goals, and for the logistics department, which won't be able to store everything.
Poorly defined goals
Goals are very important for the company to achieve its expected objectives. The department responsible for strategic planning needs to have all the goals set and pass them on to the entire team. Therefore, communication becomes even more important in the process as a whole.
Unsuccessful inventories
When we are talking about companies that need to control their stock, the inventory must be done periodically, after all, it can avoid excess goods inside the warehouse.
This is a task for the logistics sector, but it must be passed on to both sellers, so that they know how to empty and sell the products, and to buyers so that they do not purchase excess products.
Low product output
If we are talking about a company that has several product launches, low turnover within the inventory may be one of the causes of excess merchandise.
To do this, it is necessary to return to the topic of communication and goals and think strategically about what will be the right time to launch new products. After all, products need to leave at the same speed as others enter, to avoid greater losses.
Problems caused by excess inventory
Moving forward, we come to a topic that can scare many entrepreneurs: problems caused by excess inventory.
No matter the size of the company, no manager wants to suffer financial losses. When we talk about excess inventory, we are talking about products that are not in stock and that end up not generating a correct cash flow.
Depending on the product being stored, if it remains unused for too long it may deteriorate or, worse, end up past its expiration date.
This is a very common problem in products that can suffer from temperature variations. This includes not only food, but various products of the pharmaceutical sector.
5 steps to avoid excess inventory
Now that we have a better understanding of what can cause excess inventory and the problems of storing more than you sell, we will present 5 steps to improve the process. Check out our list!
Step 1: Have clear processes
Employees who don't know what their main activities are can end up overwhelmed and not delivering what they really need to. But, in reality, this should come from the top management of the company.
Therefore, the first activity to be done is the mapping of internal processes within the company. And then, pass it on to each employee and show the importance of their activity for the process as a whole.
Step 2: Plan your purchases
This is a task for the person responsible for the sector, but also for everyone involved at strategic moments. Integration between sales, purchasing and logistics will benefit the company as a whole. Invest in training that help employees become more communicative can help in the process.
Step 3: Take inventory
In the previous step we talked about the integration between the sales, purchasing and logistics sectors. The third step is a complement, which is the implementation of inventories. The frequency varies according to the type of company, but should not exceed once a month.
Knowing exactly what your company's stock is can be one of the keys to success and avoiding excess storage.
Step 4: Understand your business
It seems clear that all businesses need to understand their industry in order to be successful. When it comes to excess inventory, this topic becomes even more important as there will be periods when goods will be easier to move than at other times.
5th: Automate your logistics sector
THE automation of the logistics sector Today, it is essential for success. Having control in a clear way and through an organized warehouse will help a lot in the process.
Present on the market since 1984, the Bertolini Storage Systems provides intralogistics solutions, generating value with innovation and competitiveness. Combining quality, technology and trust, the company has crossed the boundaries that demarcate the national territory and has already become a reference in Latin America.
Developing systems for storage and movement of modern and innovative materials for the most varied market niches and types of stocks and Distribution Centers.
Want to know how we can bring more results to your company? Check out our storage and shipping guide for goods, with tips on how to make these processes more efficient.
