|How much do you keep in stock?|
I wonder, especially when orders rise up, how much items I should keep in stock. How many of you always go out and purchase just after somebody orders? How much do you keep in stock?
Bare minimum ceratinly no more than one case of any one item. My suppliers can deliver teh next day thats why I use them
I havent really got room to keep a lot of stock, I try and order once every 2 weeks from my supplier because shipping costs are high, and as I work full time as well, I can only receive orders on my days off.
Incidentally my supplier actually just went bust, and so i'm moving to another one, they keep a lot more stock and offer free delivery, so I'll be ordering once every week from now on, so I'll be keeping less stock.
I try to keep the dollar value of stock on hand slightly less than last month's sales.
I have found that knowing how much inventory to keep on hand is one of the most difficult things about being a merchant. I have bought a bunch of an item based on hot sales and then it sits there, dead in the water for months. OTOH, I recently ordered an identical amount of an item it had taken 9 months to sell and then it sold out in a week.
I had previously used the "just-in-time" philosophy to order inventory but found that I ended up spending a larger perecentage on shipping by doing that. Now I tend to order more at a time less often to save on shipping (and thus am able to offer customers a lower price). Because my biz is expanding, I generally always need more than I think I need. Expansion is great, but it means you are always having to reinvest a significant amount of profits in the biz, which cuts into how much you can take out as income. So when you are constantly expanding, you can be making less than if you were standing still. At least, this is the way it seems to me.
Never ever been a fan of 'just in time'. We don't want to be ridiculous on the stock, but will keep whatever is necessary to ship same day 6 days a week. We keep a ton of cash tied up in inventory, but it is always turning over, so it is just a necessary cost of business. Customers have tracking numbers five minutes after their order is made. Instant service and follow up make us a force in our niche.
Deciding inventory level is one of the hardest thing to do. There are several factors you should consider.
1) Look at historical data. This should provide you with a rough idea how much is needed on a per week/month basis. If your product is seasonal, a longer historical data is needed to pick up some trend. This should provide you with a demand figure.
2) Figure out your in-transit time from the time you order from supplier to actually receiving it. This should be your lead demand. Add your demand figure to your lead demand. Make sure that they are based on the same /mtn or /wk demonination.
3) Figure out your safety level. This should be the extra buffer you should keep should your demand exceeds you normal forecast.
4) Add all these 3 levels together and it should be fairly close to what you should keep on a per mth/wk basis.
This formulation works for us since we do our orders in a monthly basis. Our supplier is happy with this arrangement since he has some advance notice on how much we would need.
Some merchants will do it on a ad-hoc basis by triggering a re-order point. We have found out that this method would work fine for large high volume merchandize, providing some scale on shipping rates.
Alright, hope this helps!
It is really a critical question regarding how much stock to keep.It also depends on the size and nature of your business and the type of stock involved.
Keeping little stock suits your business if it's in a fast-moving environment where products develop rapidly.And keeping more stock might suit your business if sales are hard to predict,and it is hard to pin down how much stock you need and when.
))))Ask yourself some key questions to help decide how much stock you should keep:
#How reliable is the supply?
#Are the components produced in batches?
#Can you predict demand?
#Is the price steady?
#Are there discounts if you buy in bulk?
E-commerce is better when it involves reliability.
Thanks! This is really a great help.
|E-commerce is better when it involves reliability. |
Aint that the truth!
When I started out I held no stock. I worked with a local wholesaler that I collect stock from daily. Their company is not computerised and their stock control is terrible! The number of unhappy customers I had because I had to refund part or all of their order!
Over time, I have built up a stock of just 1 or 2 items of each product line. These are replaced straight away when they are sold. That way, if my supplier is out of stock my stock is not replaced, so can I tell to mark it as such on the website. I have plenty of alternatives that the customer can choose from, so it works out well.
It sounds like some people have just one supplier. I am curious - are there many folks who have multiple suppliers, like me? I have at least ten. Some of mine are abroad, also. This is for a store with about 350 items.
I have around 10 - just 1 supplier sounds a little risky.
I keep about 2 months worth of sales in stock. Which is alot because our cost of goods is rougly 33% of sales.
We have a little over 60 regular suppliers for several thousand widgets within several hundred brands. Plus, we work with several suppliers for unusual widgets that we only order from maybe once or twice per year. Diversifying the business to handle more widgets, especially unusual widgets, created our biggest successes. For those with just a few suppliers, it's worth looking into selling related widgets.
HRoth's method of ordering (greater quantity to save on shipping) works very well. Some of our suppliers offer free shipping for orders over a set dollar amount, so we always wait until we can get the free shipping. We typically order enough to cover 12 weeks sales and prepare to reorder once we are down to 3 to 4 weeks worth of product remaining. If you are in an area where products change quickly, then this probably won't work for you. But it works well in areas where product change is fairly slow.
If you are new to ecommerce or just starting an ecommerce site is there anyway to predict what you should order in your first shipment(s)? What is the concensus?
I think an old retail rule of thumb is to stock as much as you turn over six times a year.
In practice, I use a heuristic formula of how fast the item moves, and especially the speed of replenishing the inventory should stock run out. In other words, stock more of things that take a long time to reorder, and stock few or none extra of things that are replenished easily and quickly from redundant sources. Nothing worse than a large job or order held up over one thing, especially one you know should have been on the shelf. When you have to frequently short-ship or delay orders, profitability and customer satisfaction go into a tailspin.
Especially since I have so little influence over the supply chain as a small player, I see the just-in-time delivery model too risky, for it presumes a level of perfect efficiency that very rarely exists in real life.
As far as knowing how much of everything to stock, experience tells, but you have to keep an eye on trends, for things go in and out of fashion as far as sales volume and it's lame to get stuck with a large stock that doesn't move. When starting out without a track record, it takes a mixture of attempted prescience and thoughtful choosing of what you can afford with your allotted capital, in quantities that give the best lot/shipping prices, then adjusting the method as you go. Not only do I find it hard to predict what's going to sell (thus how much to stock) even WITH extensive experience, I have things collecting dust on the back shelf from when I opened five years ago, and sell the heck out of things I thought no one would ever want. Therefore, a hearty GOOD LUCK is at least as useful as the "hard" advice here. :)
<Edit: Re-conjugate a verb>
Automan Empire sure is right about the luck part. I am glad than when I was starting out I was not able to borrow any money to buy stock. My instincts were not good - I would have sunk myself. I know my customers better now, but sometimes I still strike out. Recently I bought 3 times as many blue widgets as I had previously bought, because they had sold out quickly. Do you think anyone has bought a blue widget since then? Heck no. Sometimes retailing is very mysterious - and humbling.
One strategy I have been lucky with is focusing on what other shops in my area do NOT have. I could not compete with established stores in terms of price, because they had lots more volume and so could get better wholesale prices. I had to give customers something else. I gave them lots of information, an aesthetically pleasing site, and merchandise that no one else carries because they all depend on the same suppliers. This has worked for me. I am working on starting up a content site and am planning on using this same strategy of focusing on what others don't have.
We drop ship everything, and our supplier has a excellent inventory management system with 99.5% on time fullfillment, so I keep no inventory.
If you drop ship and you have a reliable supplier, then you really don't need an inventory.
I used to keep 30-40K in inventory, and I sure don't miss those days.
No Stock means no counting, no packing, and most important, not getting stuck with any dogs.