The products each reseller offer to their clients are more or less the same in the Stationery and Office Supplies Industry. So the key differentiator between any two resellers is the service levels they offer.
Service comes in different forms and shape. One of the most important aspects of a good service is the ability to fulfil customer orders in a timely fashion. This in turn is dependent on the availability of the right stocks in your warehouse or store.
Managing stocks could be daunting as, in our Industry, the number of stock units that each store carries will be in 1000's. Some of us follow a simple methodology where we scan through pages of stock sheets for the monthly or fortnightly bulk purchasing. This is a time consuming process and could be prone to errors such as
*Ordering the wrong stocks
*Ordering more stocks than what is required
*Not ordering enough stocks to cover for the month etc...
There are different strategies one could adopt to identify and manage fast moving stocks. A simple Strategy we could use is called A & B stock analysis.
What is A & B stock analysis?
This strategy is around the logic of forecasting future sales based on recent sales history and purchasing stock accordingly. The sales history that we look into would be the immediate past for non- seasonal items and last year same time sales for seasonal items (e.g. Diaries).
The number of months of past sales we analyse would be different for different product categories. For ease of analysis, we could divide products into two generic categories:
1. . Short Product Life Cycle (e.g. Toners, Inks etc)
2. . Long Product Life Cycle ( All other Office Products)
For category 1, we could analyse sales during the past 4 months and for category 2, we could look at the sales trends during the past 6 months.
Based on the average sales per month, stocks are classified as A, B & C.
A stocks are fast moving and sales will be recorded for every month under consideration. B stocks are stocks that are less frequent in sales. C stocks are those that are dropping in sales and need to be cleared before they move into the dead stock list.
Once stocks are categorised as A, B & C, we can then look at the average sales during the selected months and determine the quantity to be purchased for the following month.
In our next blog, we will look at stock classification in detail. We will also touch upon monthly stock ordering and daily fill rate analysis.
