Marie Kondo shows households how to find joy in purging non-essential items, data analytics is the perfect business tool for companies to do the same.
Cleaning your warehouse will optimize the way your space is used so you can reduce costs and service your customers more efficiently. Here are some ways data analytics can help businesses clean up their stock.
Review your stock turns
The first step to warehouse cleaning is to analyze your inventory management. Efficient inventory management is essential for your business to run smoothly. Data analytics can be used to ensure you have enough stock to fill customer orders without overstocking. Some key metrics for inventory management include:
- Stock on hand: In order to understand and manage inventory in an effective manner, you must first understand what you have on hand.
- Stock turns: When you know your stock on hand, and your stock turns on individual products, it is easy to calculate stock in months. Factoring in your suppliers’ lead times will show you where you have over- and understock.
- Overstock: Overstock occurs when a larger quantity of products is purchased than is actually needed. By looking at historical sales trends and comparing these to current stock on hand, you can determine if you have an overstock.
- Understock: In terms of inventory turnover, understock reflects a high inventory turnover ratio. If you know a specific product has an especially long lead time from your supplier, you may want to make sure you have enough stock to fulfil customer orders throughout the lead time. For example, if it takes two months to source a product, and you see you only have two months of stock left, you may decide to order more frequently.
Manage your dead stock
Dead stock is overstock of a product that is no longer selling. The stock is just sitting on your warehouse shelves gathering dust - it is essentially dead. Identifying dead stock is an essential first step to warehouse cleaning. Depending on the cause of death, consider one of the following ways to salvage your investment.
First, when possible, return the product to the supplier for a refund or credit. When negotiating a new contract with a vendor make sure it includes a flexible return agreement to avoid dead stock in the future. For products that cannot be returned, consider sending them to a region or branch where there is a better market for those products. Another option is to run a promotion or package the products with products that are in demand. If these promotions don’t work, it might be time to offer a clearance discount and sell it at or even below cost to recoup some of your investment. Dead stock that cannot be moved should be discarded so that you can organize your warehouse more efficiently. It may be possible to donate these products to a charity for a tax deduction.
Reorganize your warehouse storage
Once you’ve eliminated dead stock, think about your current layout. This may be a good time to rearrange your storage racks to increase your storage capacity. It may also help to add more pallet racks so that your products are within easy reach. Last, dust shelves, sweep to clear away debris and discard empty pallets. Once you’ve streamlined your inventory, you may even find you are able to downsize.
Keep it clean with a dashboard
It is difficult to avoid accumulating dead stock without the ability to monitor the purchasing process. Data analytics solutions such as Phocas allow users to customize a dashboard with widgets to track current stock levels and stock turns. Having the ability to monitor things in real time enables users to prevent dead stock in the first place.
In addition, a dashboard can be used to schedule routine checkups. For instance, a warehouse manager can track and flag products that are nearing their return date. Another option is to create a "purge by" date to return, transfer, donate, or dispose of products before a specified deadline – similar to an expiration date. Do this regularly and you will be able to avoid a major cleaning project in the future.
Your inventory is a major investment. By implementing a data analytics solution like Phocas, you can now you can monitor things like inventory-to-purchase ratio, stock turns, slow moving stock and GMROI by product group, manufacturer, product, territory, and location. This will enable you to eliminate dead stock, gain a greater margin on slow moving products, and set pricing tiers. With regular updates and the ability to query as needed, you can now accurately forecast for refined inventory management.
Would you like to learn more about how data analytics can help you optimize your warehouse? Access the on-demand webinar here or click the button below.