What is the storage?
Stock represents all of the goods that belong to a company; this stock can be managed outsourced via warehouses. Inventory management is necessary to optimise a company’s cash flow. Good stock management will help avoid overstocking and stock shortages; different methods exist (FIFO, LIFO, point of order, etc.) to adapt to different sectors of activity. To fully understand the stock, it is important to carry out regular inventories.
Why store? The risks of poor inventory management?
Inventory management impacts different areas: product availability, costs, cash flow. We must not forget that stock entails costs and represents a financial burden for the company. It is therefore necessary to find the right stock management for each company in order to stock sufficiently while limiting the risks linked to poor stock management leading to overstocking.
Good inventory management is necessary for:
- Satisfy customer demand: It is important to have sufficient stock to meet different customer needs.
- Avoid overstocking: Overstocking generates additional costs which will increase the company’s expenses.
- Avoid stock shortages: To best satisfy customers by avoiding any disappointment during the purchase.
What are the different inventory level indicators?
The stock level corresponds to the quantity of items available at a given time. There are 4 different indicators that help maintain an optimal stock level and help find a balance between meeting demand and optimising storage management.
- The maximum stock represents the maximum storage capacity, it is the maximum capacity that a company can store.
- The minimum stock corresponds to the consumption which is planned during the delivery time, it corresponds to the quantity necessary to meet demand.
- The safety stock is the stock expected in the event of a delivery delay, it will help limit stock shortages. It takes into account: the level of hazards, the desired level of service, storage costs.
- Alert stock is the stock level that automatically triggers an order to replenish inventory. Alert stock = minimum stock + safety stock.
Storage costs
The storage cost is defined as all the charges relating to the presence of stocks in stores. The charges taken into account are deducted from the entry of the goods until the exit. On average the storage cost amounts to 25% of the total value of the stock. The main charges are:
Personnel expenses
The charges taken into account in the cost of storage include the salaries of staff in charge of stocks as well as employer contributions.
Charges relating to logistics infrastructure
Expenses linked to infrastructure may include: rental of buildings, insurance premiums, depreciation of storage facilities, maintenance, heating, electricity, water, etc.
Charges relating to goods
The storage of goods can result in additional costs: waste, obsolescence, etc. As this stock is insured, the cost of insurance and the cost of financial immobilization must be taken into account.
Charges relating to tools and materials
It is necessary to take into account the depreciation of the tools used as well as the cost of maintenance and operation.