As many businesses grow, they can start to experience difficulties. Stock control management can be one business area that reveals weaknesses in business structure and growth. The way this often emerges is in one or more of these four areas:
- Increased costs – every business will experience fluctuations in margin and this is something that should be viewed as part of the process of running a business, but where cost increases are directly related to the difficulties in getting products to end users, a steady and ineradicable increase in business costs will be seen.
- Poor service- business growth is a paradox. It should increase profits, grow departments and allow for reinvestment in key areas. All too often, it can lead to overstretched and under-resourced personnel, rushed decisions and poorly implemented processes, which in turn can lead to lower productivity (see below), increased returns and business reputation impacts as a result of poor reviews and/or complaints.
- Lowered productivity – tired or ill-trained staff struggle to achieve their targets and make more mistakes. Demotivated personnel can also be less inclined to double-check picking lists and notes about deliveries which can lead to badly managed distribution, especially in the last mile of delivery. All these have a productivity cost which creates a negative feedback loop, leading to less motivation, more risk-taking and a culture of believing that it’s impossible to succeed so why bother? Warehousing and distribution personnel are particularly prone this to kind of burn-out.
- Stock wastage – breakage and handling errors, leakage and shrinkage and spoilage are all evidence of a business that is growing but failing. It’s a sign that some elements of the business such are marketing, are outstripping other elements such as distribution. While some of this can relate to lowered productivity, it can also be a sign of failing stock control systems or the inability to obtain and use data to support efficient functioning.
One reason for this pattern of difficulties is that most start-ups do not have a strong focus on warehousing and distribution. The founders of any organisation are most likely to be strong on ideas, to thrive on marketing and production and research and development. However, as a company grows, warehousing and distribution is likely to become more vital, but without in-house expertise, it’s an area of the business can become a ‘cinderella department’, without either a strong advocate at board level or the resources to develop internally.
It is at this point that many organisations find it valuable to engage with a 3PL partner for the simple reason that it allows them to streamline their warehousing and distribution processes without having to develop in-house processes or invest substantial amounts in up-skilling personnel.
Dealing with growing pains in warehousing and distribution
One of the greatest difficulties that any organisation can experience is the problem of discarding methods, beliefs and technology that worked well at the beginning of the business’s evolution. These elements, which become hurdles to jump over rather than routes to success, can include outdated stock control measures, cumbersome communication systems, and inadequate training. As a result individuals can experience a drop in morale, may make errors and are likely to under-report failure, all of which will damage profitability and reduce customer satisfaction.
Reviewing stock management processes
For any business that prioritises stock, finding the best stock management processes is vital. Some examples are:
- FIFO – First In First Out systems are popular for any business that has a high investment in fast moving consumer goods (FMCG). Whilst simple in concept, requiring a company simply to ship out the oldest stock first, any business can ensure that perishable or fashionable items move most rapidly – this reduces wastage and prevents damage during storage, which can be a major contributor to wastage costs.
- ABC – the alphabetical stock system works best for seasonal businesses. Stock is divided into A, B or C according to its turnover rate. Items that turnover rapidly are placed nearest to pick and pack areas which speeds up their selection and distribution, whilst items classed as C are put furthest from the distribution stations as they are needed less often. This system works well because it allows restructuring of stock depending on seasonal priorities.
Resolving staffing issues in warehousing and distribution
Many small businesses operate with the equivalent of paper only systems, but productivity can be boosted rapidly with the implementation of a degree of mobile technology to free up personnel. This has three major benefits:
- Improved communication – smartphones and scanners have given individual warehouse personnel the opportunities to access information such as stock control apps and details such as individual order notes. This permits individualised pick and pack systems, and real time updates of stock, leading in turn to better last mile delivery and satisfaction scores and to more sophisticated stock management processes.
- More rapid processes – while mobile apps can be used to update stock control software allowing for more quicker reordering, mobile printing can also create faster fulfilment systems, ensuring that both ends of the delivery system are highly responsive to actual demand.
- Reduction of redundancy – a traditional warehouse process was highly labour intensive, involving products passing through several sets of hands, this is time and resource consuming and increases labour costs. Barcode or other mobile systems can streamline these processes which allows for maximised resources and reduces the tendency to build redundancy into warehousing operations.
By resolving issues relating to poor service, low motivation, lack of data and limited resources, a company can move into a mature growth period without overextending warehousing and distribution functions.