Determining warehouse capacity accurately is considered one of the very important topics in warehouse management because of the decisions that determine the strategies and methods of work of the entire institution, and there are a number of factors that will affect determining warehouse capacity, which you must take into consideration while determining capacity, and in this article we will present You have all the details related to the process of determining warehouse capacity, as well as how to improve and increase it.

What is warehouse capacity?

What is meant by warehouse capacity is the space available for storage, in which stock can be prepared and orders placed.

It is the available space, which is determined according to a number of factors, as:

• Dimensions and weights of the products to be stored in this warehouse.
• The volume of inventory the company needs to meet the special demands of its customers.
• The space your employees need to efficiently carry out customer orders and locate items to fulfill orders.

Warehouse space utilization versus storage utilization

Many confuse Warehouse space utilization with storage utilization, and in general Warehouse space utilization refers to how efficiently a company uses its warehouse,

And storage utilization refers to how efficient the use of space is in storage, and you can get it by multiplying the area of Warehouse space utilization by the net height for warehouse.

What makes warehouse capacity important?

Determining warehouse capacity is very important, due to its prominent role in logistics management,

And it also has a major role in improving the storage and management of your inventory, and thus better growth of your business.

Also, through warehouse capacity, you will be able to know the amount of inventory that you can accommodate, thus reducing the risk of out of stock as well as backorders.

Many believe that they always need to have the largest possible space, and this is not true at all,

As the greater the warehouse space, the higher the costs of storage and inventory control tasks.

Therefore, always make sure, when determining your warehouse capacity, that you choose a space that:

• Suits the size of your business
• Helps you in the rapid and efficient execution of orders.

How to calculate warehouse capacity

In order to improve your warehouse capacity, you first need to determine the actual capacity of your warehouse.

Here are the steps you need to calculate warehouse capacity:

1. Specify the square feet measurements for your warehouse.
2. Calculate the total area that you use for non-storage purposes, such as bathrooms, rest rooms, and so on…
3. Subtract the non-storage space from your total warehouse space, to get the available space for use in your warehouse, and you can rely on this formula to calculate it:
4. Area available for use = Total Sq. Ft. Non – Storage Space Sq. Ft.
5. Specify the exact amount of storage space available for use, as the visible maximum height of the warehouse.
6. Multiply the maximum apparent height of the warehouse by the total area available for use in your warehouse, to get the storage capacity in cubic feet, and you can rely on the following formula in the calculation:
7. Storage capacity = usable space in square feet. Foot. ×Maximum visible height in feet.

Optimizing warehouse capacity

Now that we know how to determine warehouse capacity, you can now think about how to improve warehouse capacity, and digital warehouse tools can help you optimize Warehouse Layout capacity efficiently.

Digital warehouse tools also help you effectively optimize your e-commerce warehouse operations.

Warehouse management systems (WMS) help you improve warehouse capacity by:

• Tracking real-time inventory.
• Keeping track of your inventory flows.
• Helping you identify your inefficiencies
• Improving your operations.

Warehouse KPIs also play an important role in improving warehouse capacity by determining the efficiency of your employees in the operations of storing your stock in the warehouse and other useful functions.

Increasing current warehouse capacity

Many are looking for a suitable way to increase their capacity, which will help them in achieving future growth.

In order to increase current capacity, you need to determine your future demand by forecasting your future inventory needs.

So you’ll need to reconsider your current warehouse setup, and there are a number of things you should check first before considering increasing current capacity:

• Make the most of your existing warehouse space.
• How double shelves can be used for storage to increase space.
• Possibility to make some adjustments in the scroll view to save more space.
• The possibility of charging and receiving docks, thus saving more space.
• The extent to which the maximum benefit from warehouse automation is achieved.

FIFO and LIFO Inventory Management are one of the methods also used in inventory valuation, as there are many of these methods, the most important of which are FIFO and LIFO, and through them, you can evaluate your inventory by evaluating the cost of goods sold and ultimately determining your profitability, and the inventory valuation process depends on the costs incurred to obtain on inventory and preparing it for sale, and in this article, we will show you all the details about FIFO and LIFO Inventory Management.

What is a FIFO and LIFO Inventory Management?

One of the most popular terms used is FIFO and LIFO Inventory Management. FIFO is an abbreviation of First In First Out and LIFO is an abbreviation of Last In First Out.

It is necessary for the company to keep the quantity of inventory bought and sold in order to monitor and determine the cost of inventory for the period.

Its cost can be calculated through inventory, and inventory or stock valuation takes more than one method, the most important of which is FIFO and LIFO Inventory Management.

Therefore, FIFO and LIFO are one of the most popular terms used. FIFO is an abbreviation for First In First Out, and LIFO is an abbreviation for Last In First Out.

It is also important to note that choosing the appropriate method of them depends on the financial position of the company, especially since these accounts will mainly affect the income statement and inventory in the balance sheet.

FIFO: First in, first out and how does it work?

This method is based on the premise that the first inventory that is purchased is the first that is sold,

And the remaining assets in inventory are matched to the assets that were recently purchased or produced.

It is one of the most common inventory valuation methods companies use because it is simple and easy to understand.

During inflation, the FIFO method results in a higher value for final inventory, a lower cost of goods sold, and a higher gross profit.

Unfortunately, the FIFO model fails to provide an accurate depiction of costs when there is a rapid rise in prices, and this method does not offer any tax advantages.

LIFO: Last in, first out and how does it work?

Under this method, the newest stock is supposed to be sold first while the oldest stock remains in stock,

And companies rarely use this method because the old stock is rarely sold and gradually loses its value, and this results in a big loss for the business.

The only reason to use LIFO is when companies expect the cost of inventory to increase over time and inflate prices.

By moving high-cost inventory to the cost of goods sold, the companies’ reported profit levels can be lowered, and this allows companies to pay lower taxes.

FIFO and LIFO similarities and differences

As for the similarities between FIFO and LIFO Inventory Management, they are both used in inventory valuation, and each of them is used according to the company’s financial position.

The main differences between FIFO and LIFO Inventory Management are their effect on the company’s income statements and balance sheet.

In times of inflation:

• If the LIFO method is used, the cost of inventory sold will be higher than the remaining inventory, which will result in a higher cost of goods sold and a lower value of inventory on the balance sheet.
• If the FIFO method is used, the cost of inventory sold is less than the inventory held, which leads to a lower cost of goods sold and an increase in the value of inventory on the company’s balance sheet.

Another difference between FIFO and LIFO Inventory Management is how they affect tax, that:

• LIFO method will result in higher cost of goods sold and will result in lower taxes because profits are lower when the cost of goods is high.
• FIFO method will result in higher tax because the cost of goods sold is lower and therefore profits will be higher.

Which Method Is Better FIFO or LIFO?

We cannot determine the best method, FIFO or LIFO, but in general, you should choose the method that best suits your company’s financial position.

Therefore, the FEFO method is often applied by food retailers and pharmacies, and products containing semi-expired products are usually placed on the front shelves or in easily accessible places.

The LIFO method is used by companies when they expect the cost of inventory to increase over time and lead to price inflation.

By moving high-cost inventories to the cost of goods sold, companies’ reported profit levels can be lowered, and this allows companies to pay lower taxes.

The packing list is one of the most important documents used in the shipping process. If you request a quotation for your shipment from the shipping agent or your logistic partner, they will ask you to provide them with your list, and this list has special benefits and importance that will help you in your work greatly, and in this The article will provide you with all the details about the packing list and its importance as well as the most important contents included in it.

What is a Packing List?

A packing list is a document that helps make international trade easy and smooth, as it provides complete information about your shipment to the exporter, forwarder or consignee.

This list also includes all the information about your shipment details, how it was packaged, dimension and weight details, destination details, etc.

Essentially, a packing list allows customers and others involved in the transaction to visualize the contents of your shipment; hence it is an important document.

Why Do I Need a Packing List?

The importance of these lists and the reason you need it is that it is the commercial document that details the contents of a package.

And through which transport agencies, government authorities and customers are informed of the contents of a package or shipment.

Through all those details the package is dealt with, the seller creates a packing list and sends it to where the goods are in order to get an accurate count of the goods sent.

Once the goods are noted and packed, the list is sent with them to their destination. Here are a number of points that illustrate the importance of this list:

• Identification of lost cargo especially for carrier and insurance claims.
• Allow selective inspection by customs authorities, and many governments require it for large shipments.
• Providing a map of the shipment so that the buyer can easily unload and store the shipped goods.
• Clarify the details required to obtain a certificate of origin.
• Represents evidence of the Material Safety Data Sheet if the goods are deemed hazardous.
• Represent a guide for the recipient or buyer.

The Packing List: A Vital Freight Document

The packing list is a vital shipping document, because it helps in the process of importing and exporting goods faster and easier, and it informs those responsible for the contents of the package or box, thus helping them to verify its contents.

Freight forwarders, customs officials, and others involved in the supply chain management use the details in the listing, through which items are checked for compliance with rules and regulations.

It is also through this list that customs officials at the port of destination will determine all import fees and taxes, in addition to being a source of vital information required to complete the bill of lading.

Things to look out for on a shipping packing list

There are a number of obscure things to look for in the packing list and check them well, the most important of which are:

• Packet sender.
• Shipping destination for the package.
• The number of items included in the package.

This is in addition to checking the rest of the packing list items, which we will show you in the following paragraphs in some detail.

What information is included on a Packing List template?

There are a number of basic information that you must include in your list templates, and these lists can cause you delays in the customs process.

Here are the most important items to include in your packing lists:

• Date.
• The origin and destination of the goods.
• Total number of Parcel Management in the shipment.
• Specific details for each package.
• Weight and volume of each package.
• Weight of the whole shipment.
• The commercial invoice number for the shipment.
• Shipper contact information.
• Send contact information.

Every company needs to pay great attention to the provision of effective inventory management, in order to ensure that stock quantities are maintained properly and the quality of the products is maintained until they reach the consumer.

Effective inventory management systems track all processes related to the receipt and delivery of merchandise, and stock levels depending on the type of inventory.

In addition to tracking and controlling incoming and outgoing according to documents and invoices, which facilitates the tracking of all daily procedures.

In this article, we will show you all the details about effective inventory management, as well as its most important strategies and techniques, with an explanation of its most important benefits.

What is Inventory Management?

Before we begin to explain the importance of effective inventory management and methods, we will first need to know what inventory management is.

Inventory management is a process by which products are tracked and organized in the period owned by the company.

So that profit is realized and calculated when inventory is sold to customers. Inventory management is an approach to ordering, storing and selling both raw materials and finished products.

Benefits of effective inventory management

As for the importance of effective inventory management, there are many positive effects that can accrue to all parties in the business operations environment when using it.

Whether it is at the level of the organization and its administrative, manufacturing, sales and warehousing departments, or at the level of customers interested in the items and products of this organization. Therefore there is great importance to the availability of effective inventory management, and here are the main benefits from it:

1. Minimize errors caused by traditional methods

The importance of having effective inventory management systems is to reduce the amount of errors that can occur during traditional warehousing and inventory processes.

Where effective inventory and stock management systems are given an opportunity to review errors that can occur during the receipt, storage and transportation of goods; as computerized systems are involved in counting, reviewing and checking quantities and items in modern inventory systems.

Barcode systems used in inventory and inventory systems also allow recording all data related to goods or products.

The impact of any operations on these items is reflected in accounting as soon as any physical action takes place on them, which helps reduce errors, especially in the presence of high sales, purchases, storage and transfers.

2. Increase customer satisfaction

The process of inventory management is never separate from the satisfaction and service of customers who deal with a particular company or organization, provided that it is effective.

Where customer satisfaction is related to the availability of the goods or products they require, especially those that are in demand on a regular basis.

Where inventory management systems contribute to knowing the need and then supplying the commodity stock of a specific material in the event of a large demand for it.

This helps customers find the orders or products they want quickly and at any time.

3. Improve the review and audit process

The process of reviewing and auditing the operations that take place on the inventory is affected by the type and development of inventory systems, as some organizations resort to the use of tracking systems for all movements on various items.

This facilitates the review of operations on them and protects them from loss or theft. Modern inventory management processes also ensure greater care for financially valuable products.

By linking it to trackers that can locate and track its movement during transportation or delivery service, providing greater flexibility in audits, audits and inventory.

It is also possible by using modern inventory management systems to conduct a tracking and periodic review of some items to ensure their safety.

4. Save money and improve cash flow

By reducing losses, these effective systems provide the feature of tracking products that are close to their expiry date.

Thus bringing it to the fore for disposal first, so these systems help you keep track of your inventory automatically.

Effective inventory management also helps you identify which products are at the top of sales and which are least in sales.

Thus creating a strategy about the products you need to order, as well as the money you should keep on hand.

5. Evaluation of the company’s business

Effectively functioning inventory management systems result in excellent business valuation and financial analysis of your organization.

This is done by studying some financial rates and ratios related to inventory by the organization’s management.

One of the most notable is the inventory turnover ratio, which reflects the organization’s ability to convert its merchandise inventory into cash.

Inventory Management Process

Your company needs to fully follow the inventory management process through the system, in order to be able to manage the inventory effectively.

An effective inventory management process includes oversight of warehousing capacity and production, as well as follow-up on product sales.

This process takes place in two main stages, namely:

1. Obtaining the basic components and raw materials to stock them.
2. Selling quantities of finished products to final consumers on demand.

Steps in Inventory Management Process

As for the steps of the inventory management process, it is divided into two main steps, and each step has other sub-steps. where:

Step One | Determining the progress of the inventory management process

In which the identification of the tasks to be performed by each department is checked. The production department also sends the finished products to the sales department. The departments concerned are:

• Purchasing, which is the department responsible for purchasing raw materials to be stored in the warehouse.
• Production, this department specializes in using raw materials to develop and make finished products for sale.
• Warehousing, this section stores goods until they are distributed to end users.

Step Two | Assign duties to professionals

After the departments are identified, you will need to create job descriptions for the tasks that each individual performs, as well as create job descriptions for any new recruits for the number of jobs involved.

Inventory Management Techniques

The following are the most important techniques that are used in effective inventory management:

1. Setting Base Levels for Estimation

It is one of the most important inventory management techniques that will help you keep track of your inventory.

By keeping a base level for each product, this will help you determine how many products you have.

This technology will give you a warning sign when your inventory is running low and you will be able to set a base level for your products.

2. First-In-First-Out (FIFO), Last-In-First-Out (LIFO)

The principle of first-in-first-out is an important principle in organization and management, and the process of inventory management requires that the older products be taken out first.

The reason behind this is that old products are more likely to expire compared to new stock. The LIFO method is the other most widely used inventory management technique.

Which sells new products first and old products last. This method helps reduce the sales tax that producers need to pay for the products they sell.

3. Dropshipping

This technology is where products are sold directly from the supplier’s warehouse, and is one of the fastest ways in business models. Anyone can use it by creating and promoting their own website.

4. Just in Time Delivery

One of the most important techniques used in order management and inventory is the JIT method, through which inventory costs are reduced and inventory is acquired as needed.

Also, through JIT technology, the company will be able to deal with inventory that is not used or sold by customers.

5. Prioritize with ABC

The ABC technique is the best technique for effective inventory management for products that are sold in different categories.

Through it, the company will be able to prioritize its inventory by separating the products that require a lot of attention.

The following is how the products are categorized by this method:

• Products that sell slowly but are of high value.
• Products that are sold at a moderate pace but of moderate value.
• Fastest selling but low value products.

There is great importance for digital warehouse tools, as warehouses need to be equipped with the latest technologies that keep pace with huge developments. This is due to the rapid advances in technology, enabling companies to keep pace with manufacturing and production processes and consumer demands at the same time.

And through the use of digital warehouse tools, warehouses can be automated to obtain an intelligent warehouse that improves efficiency, productivity and accuracy of work.

It also provides digital repositories tools to provide flexibility and speed in the completion of work for employees. In this article, we will show you all the details about the most important digital repositories tools and their importance, and show you how to keep them flexible and efficient.

What are digital warehouse tools?

Digital warehouse tools are important elements that help you enhance your warehouse and keep pace with progress. It is used and supplied to warehouses, which helps in:

• Reducing human error.
• Productivity improvement.
• Reduce overhead.
• Increase the accuracy of assessing your workforce requirements.
• Reduce the risk of infection.
• Increase flexibility in working hours.

The most important digital warehouse tools in 2022

There is a set of common digital warehouse tools that must be used today to facilitate warehouse operations. And all of this will reflect positively on your productivity and sales.

Here are the most important digital warehouse tools that you need in 2022 and that will clearly improve your performance:

1. Automated Picking Tools

It is one of the digital warehouse tools that promote dramatic improvements in accuracy and productivity in warehouses.

These tools can be relied upon to improve item selection and labor allocation, which will reduce human error.

Automated Picking Tools includes many other important tools that will enhance the productivity and efficiency of your business.

2. Automated inventory control platforms

These two technologies, such as one of the digital warehouse tools, helped in getting rid of paper and pen in inventory operations or manually calculating cycles.

Especially since manual inventory involves a lot of errors that can cause huge disruptions during the work.

So Automated inventory control platforms help you to monitor inventory and make the inventory process automated.

This is because it is characterized by its high speed in collecting data and preparing accurate reports in real time.

3. A Warehouse Management System

Warehouse management systems help you collect all your data in one comprehensive platform that is easily accessible at any time.

Which gives you a complete view of your business and helps you in preparing reports and statistics on business efficiency in real time. This saves you calories in making the right decisions.

It is one of the most important digital warehouse tools, that there are a number of basic characteristics that must be available in the warehouse management system that you will deal with.

And the following are the most important of those basic features and characteristics in WMS:

• Access to real-time data gives you effective insight across the supply chain management.
• Increased order forecasting accuracy.
• Effectively allocate labor and thus lower your labor costs.
• Simplify your warehouse operations.
• Layout of the warehouse in the best possible way.
• Enhance and improve selection accuracy.
• Reduce time at work.
• Improve responsiveness and flexibility in your warehouses.
• Enhance your level of customer service.
• Enable the implementation of continuous strategies for improvement.
• Strengthen your relationships with suppliers.
• Increase and improve the security of repositories.

4. Automated Guided Vehicles

It is a very effective and useful digital warehouse tools, and this technology helps you in maximizing the process of storage and retrieval.

These mechanisms are self-guided, including the steering of forklifts and pallets themselves. And that is by tracking the digital tracks that will be programmed on them.

So Automated Guided Vehicles or AGVs as one of the digital warehouse tools help you easily boost your business growth.

5. IoT Implementation

The Internet of Things is one of the most important digital warehouse tools, through which you can control all the moving parts in your warehouse easily and remotely.

IoT technologies also help you monitor temperature, humidity, and other conditions. It can also integrate incoming data and effectively reduce cases of theft or forgery as well as preserve data from loss or damage.

So IoT as one of the digital warehouse tools helps synchronize all your data into an easily accessible network. This will facilitate inventory control and business planning, thus providing an outstanding customer experience.

There are many types of inventory systems used in companies, and the periodic inventory system is one of the systems used by some companies. In general, every company needs to know what it has in stock of the products or raw materials it uses; to learn how to manage it appropriately in line with the volume of demand for its products in the market. Thus, avoiding a sudden shortage or a large surplus that becomes useless, each organization uses the inventory system that is best for it. In this article, we will discuss the most important information about the periodic inventory system, as well as its advantages and the most important disadvantages.

‎What Is Periodic Inventory?‎

It is the inventory method by which inventory is taken at the end of each year, or when the company’s statement of financial position is prepared.

The periodic inventory is concerned with the actual inventory of the inventory, not just the book inventory, meaning that the number of quantities actually in the stores is counted and counted at the cost.

‎What is a Periodic Inventory System?‎

As for the periodic inventory system, it is one of the software systems that supports periodic inventory taking.

The company enters its inventory numbers into the periodic inventory system, then the system performs the initial review of the goods and reconciles the different data.

This system supports the current inventory keeping method, through which updated inventory lists can be obtained and printed, as well as the ability to calculate any data you want and settle inventory for new periods.

Periodic Inventory Accounting

And speaking of how to calculate the periodic inventory, there is a basic mathematical formula that is used in accounting for the periodic inventory. The main objective of that formula is to determine the cost of goods sold as well as the change in inventory each time period. The following is the accounting formula for periodic inventory:

• Closing Inventory = (Purchases + Beginning Inventory) − Cost of Goods Sold

‎Periodic Inventory System Advantages and Disadvantages

There are pros and cons to the periodic inventory system. Although it is easy and inexpensive, as we have indicated, it uses minimal information.

Also, through this system, you do not collect and disclose data in real time. And below we will discuss the most important advantages and disadvantages of the periodic inventory system:

1. The Advantages of Periodic Inventory System

Here are the main advantages of a periodic inventory system:

Simplicity, where this type of inventory is characterized by its simplicity, as it performs the inventory process through simple steps and with fewer calculations.

Low cost. In this method of inventory, you count the inventory at regular intervals, without the need to purchase sophisticated inventory control software, which has a high cost.

2. The Disadvantages of Periodic Inventory System

On the other hand, there are a number of serious drawbacks to this method of inventory, the most important of which are as follows:

Slow processing, because updating the periodic inventory system occurs after a specific period of time, and thus the process of tracking goods is difficult.

It may also not be suitable in some industries that need to modernize faster, such as clothing, as this system may negatively affect the revenues of that industry.

The Benefits of a Periodic Inventory System

The periodic inventory system has many benefits and this is probably the main reason why most companies rely on it as one of their primary inventory methods.

Especially since the periodic inventory system is characterized by its ease of implementation and its low cost, in addition to not requiring a large number of employees to deal with this type of inventory system.

The periodic inventory system is particularly suitable for small businesses, and by doing a basic count of their inventory on a daily or weekly basis, they can get a proper indicator of their inventory performance.

Out of stock is one of the most annoying issues facing retailers and online store owners, which can frustrate customers and give them a bad shopping experience. In general, inventory management is critical to the success of a retail business, especially maintaining proper levels of inventory, so that stockouts, as well as overstocking, are avoided. Generally, a well-managed inventory will keep customers happy, boost sales and thus increase revenue. In this article, we will show you all the details about the problem of out of stock, as well as how to deal with it properly.

‎What is Out of Stock?‎

Out of stock means that certain items or products are not available at the point of purchase when the customer orders them.

Which negatively affects the customer experience, and even makes them abandon the shopping cart and go to your competitors.

‎What Triggers an Out of Stock Condition?‎

As we mentioned, the out of stock issue negatively affects the customer experience. And this problem may occur for many reasons, such as:

• An error during the inventory calculation.
• A very high demand for a particular item.
• Suppliers are late in providing the items.
• Not having the financial resources to provide an adequate amount of these items in your warehouse.

‎What are the costs of stockouts?‎

Out of stock costs retailers and online store owners a lot, especially since there are additional hidden costs due to this problem. Here are the most important costs related to stockouts:

1. Lost revenue

Which represents lost revenue, i.e. lost revenue as a result of the unavailability of products at the time of request, and thus the loss of its own profit.

Which may lead to the loss of customers in addition to other large losses in sales. And you can rely on the following mathematical formula to determine out-of-stock losses:

• Cost of stockout = [Number of Days Out of Stock*Average Units Sold Per Day*Price Per Unit or Profit Per Unit].

2. Frustrate customers and give them a bad experience

Customers get frustrated when they find the items they want to buy are out of stock, which makes them look for the product with your competitors.

3. Destroy your reputation and your brand

Stock outs affect how loyal customers are to you and your brand, thus negatively affecting your brand as well as harming your reputation in the market.

4. Increased operational costs

This is because you purchase the product that is sold out and ship it quickly, and therefore incur additional expenses for express delivery fees.

How to Reduce Out of Stock Conditions

There are many techniques to reduce out-of-stock situations, including controlling demand through pricing.

Also, having sufficient stockpiles for high-demand products, and dealing with additional suppliers can help reduce stockouts.

In the next paragraph, we will present a number of effective solutions and methods that help reduce and avoid the stockouts problem.

‎How can retailers avoid running out of stock?‎

There are several solutions that can help retailers and e-store owners proactively avoid stockouts.

Which helps in gaining customer satisfaction and avoiding costs related to the stockouts problem.

And the following are some of the most prominent of these solutions:

1. Predicting customer demands more accurately

Predicting customer demand more accurately can help you avoid this problem greatly.

And you can rely on performing ABC analysis to provide accurate forecasting about customer demand.

Taking into account the lead time between placing orders and receiving them, you can measure that lead time by examining previous purchase orders from specific suppliers.

2. Automation of stock replenishment processes

This is based on modern technologies and tools such as Radio Frequency Identification (RFID) technology.

Radio Frequency Identification (RFID) technology stores and tracks product information in order to maintain accurate inventory.

3. Control of demand through the use of pricing

The law of demand in economics generally states that the higher the price, the less the quantity demanded of those products.

And therefore you can control excess orders by raising the price of the product, and thus reducing the number of people who want to buy it.

But be sure to re-price appropriately, so as not to completely destroy the demand for this product and lose your customers.

4. Having backup suppliers

Having back-up suppliers can help you avoid this problem, who will help you in case of larger sales or sudden change in demand.

5. Improve your safety stock

It is one of the important things that must be taken into account with regard to avoiding the problem of running out of stock.

Which will serve as a reserve stock available for a specific item in the event of a sudden increase in demand for it.

‎How do shoppers react to out of stock?‎

In fact, customers deal with the stockouts problem very negatively, and this is mainly because this problem makes them very frustrated.

Customers tend to avoid dealing with the store again and lose confidence in it, or go towards competing customers and deal with them.

The most important thing that sellers strive for is to meet customers’ demands in the best possible way, and this is possible through having an appropriate amount of inventory and managing it well. The inventory replenishment process affects ensuring that the right amount of inventory is available at the right time, which helps maintain a company’s cash flow.

It also contributes to reducing costs and maintaining customer satisfaction. In addition, inventory replenishment can clearly affect the profits and revenues that the company achieves, with the possibility of doubling them. In this article, we will talk in detail about inventory replenishment and its importance.

What is inventory replenishment?

Inventory replenishment is one thing that helps companies reorder different items of inventory in such a way that customer demands are met.

This is without stock build-up while ensuring that the right amount of stock is available at the time, thus reducing costs related to stock mismanagement.

Why is inventory replenishment so important?

The reason inventory replenishment is so important is that it helps businesses have the right amounts of inventory on hand.

Thus ensuring that customer demands are met while reducing expenses associated with stock build-up or out-of-stock, thus increasing the company’s profitability. Here are the most important points that illustrate the importance of inventory replenishment:

1. Avoid out of stock

Using an appropriate inventory replenishment strategy helps to avoid sudden stock-outs and delays in fulfilling customer orders.

2. Reduce shipping costs

This is because these strategies contribute significantly to controlling shipping costs, by ensuring that orders reach customers in a timely manner.

Thus, avoiding delays in orders caused by the lack of appropriate quantities of stock, which saves on additional expenses for shipping.

3. Avoid overstocking

As these strategies contribute to helping companies avoid maintaining large quantities of inventory.

But rather providing the appropriate quantities of it according to the volume of customer orders.

This helps reduce additional expenses related to inventory deterioration, as well as savings on space holding costs and capital restrictions.

4. Improve customer satisfaction

Inventory replenishment greatly improves customer satisfaction, because companies are able to meet customer orders faster.

Thus avoiding customer frustration due to late orders, which helps in maximizing profits and saving costs significantly.

Inventory replenishment methods and strategies

Inventory replenishment methods and strategies

There are several inventory replenishment methods and strategies that companies can choose from.

Which help them determine the best time to reorder inventory items and check for the right quantity.

Here are some of the most important methods and strategies available:

1. Top-off method

It is one of the most popular strategies among distributors and retailers, especially those with fast-moving inventory items.

This method replenishes shelf selection during slowdowns, helping to provide adequate inventory of fast-selling items.

2. On-demand method

Another common inventory replenishment method and strategy is the way in which items are ordered that meet current demands.

With the provision of appropriate safety stocks, it ensures that stocks are avoided as a result of fluctuations in demand.

3. Periodic stock replenishment method

It is one of the ways in which inventory levels are reviewed at specified intervals, and then determined if certain items need to be replenished.

4. Reorder point method

One of the most important methods and strategies used in inventory replenishment is the reorder point.

Through which a new quantity of stock is requested before it falls below the level of safety stock, thus helping the company to avoid out-of-stock situations.

There is a mathematical formula that can be used to find the appropriate reorder point, and the following is that formula:

• Reorder point = [lead time * average daily usage] + safety stock

Choosing the right inventory replenishment strategy

You need to choose the right inventory replenishment strategy that helps you always have the right amount of stock in stock.

Thus avoiding stock buildup or sudden stock outs, so it is not possible to determine the best strategy or method to rely on.

But it depends on the nature of your activity and work itself. LOGSTIAT can help you determine the right amount of inventory you need and provide the best inventory tracking and control systems.

So if you encounter a problem in managing inventory or meeting customer orders in a timely manner, never hesitate to contact the LOGSTIAT team to provide the best smart solutions suitable for your business.

Inventory is the cornerstone of any company, so any company should manage its inventory well and avoid excess inventory. Especially since poor inventory management causes waste of resources, which can cost the company more huge additional expenses. When the inventory in the company exceeds a certain limit, this means that excess problems occur, which results in huge problems for the company that we will review in detail in our article. We will also show a set of effective ways to get rid of excess inventory, and deal with it properly while reducing the resulting costs.

What is excess inventory? ‎

Excess inventory is when a company’s inventory contains an excess of what is required, which, if not disposed of promptly, will incur significant costs to the company.

Especially since excess problems, if it remains in warehouses for a long time, can be damaged, and thus lose its value or decrease its value and lose its profits.

What causes excess inventory? ‎

Most of the causes of excess problems are related to poor planning and inventory management or problems related to the sales movement.

And the following is the most prominent of these reasons:

Using outdated methods of inventory management

If you don’t know what inventory is in stock then you are definitely at risk of having a lot of excess inventory that you don’t pay attention to.

Also, manual inventory counting is time consuming and also does not provide accurate data on the status of inventory.

Unlike using automated inventory counting, relying on proper inventory management software. This helps in:

• Setting minimum and optimum inventory levels.
• Making sure that the products your customers need are available.
• Checking that there is no large surplus in stock periodically.

The presence of inaccurate data on the sales movement

The most common cause of excess inventory is the presence of a large amount of goods that users do not have a high demand for.

But inventory management software can help you forecast the demand for your inventory and manage enterprise resources by creating reports on the sale status of products.

As well as identifying the best-selling products in certain periods, which enables you to measure sales of similar products to avoid excess inventory.

Besides the previous reasons, there are a number of other important reasons that may be a major factor in the occurrence of excess problems in retail. Such as:

• Inaccurate sales projections.
• Delivery delays and failures.
• Product returns and canceled orders.
• Negative economic conditions.
• Overpurchasing.
• Volatile consumer demand.

get to know : The 5 key factors for a successful delivery service

What are the main disadvantages of excess inventory? ‎

Many companies think that having excess problems is a good thing, but in reality it is quite the opposite.

Excess inventory negatively affects the revenue a company generates, as well as the amount of working capital it has.

Here are a number of points explaining the most important disadvantages of excess problem:

• The occurrence of problems in the company’s cash flow, and this is due to the negative impact of this surplus on the operating capital owned by the company.
• Loss of more revenue resulting from the presence of additional stock that cannot be sold and obtain its profits or its value decreases as a result of its stagnation in warehouses.
• Increase operating costs as a result of this inventory occupying space in warehouses, and companies bear the cost of that space with no return from it.
• Decrease in the value of stagnant inventory in warehouses, as a result of its presence for a long time, and thus its quality deteriorates, which affects profit margins.
• Negatively affecting the company’s financial outlook, due to lack of clarity in the inventory turnover rate.
• Decrease inventory turnover and increased storage costs, which affects the company’s financial position.

Options for excess inventory management

There are many options that retailers can rely on to better manage excess inventory and reduce the damage caused by it. Here are the most important options that retailers can count on:

1. Sell at a discount

One of the most important options that can help you get rid of excess inventory quickly is to make discounts on those products. This enables companies to:

• Bear the least amount of loss possible.
• Compensate for losses resulting from stagnation of inventory in warehouses as a result of an excess of it.

2. Sell in bulk to discount stores

One way to get rid of excess problems is wholesale, i.e. selling most of the quantity to one party at a discount.

3. Keep in stock and wait for next season

This option is suitable only for commodities that can retain their value over a suitable period of time, so that traders keep that quantity until the next season and then sell it.

4. Using technology to turn over inventory quickly

Due to the current situation and the increasing complexity of supply chains and their disruptions at times, the process of forecasting stock levels and predicting market demand has become more complex.

But the inclusion of technology in inventory management processes can help solve this dilemma, through the use of the latest technology to track inventory.

Thus, stock levels are monitored and future orders are forecasted more accurately, based on available data.

This helps to increase delivery efficiency and reduce delivery costs, thus successfully reducing excess inventory levels.

And LOGSTIAT can provide you with the best inventory management systems that will help you keep accurate inventory tracking.

Thus, determining the appropriate stock levels, and avoiding stock shortages or overstocking, which positively affects your profit margins.

How to eliminate excess inventory

The problem of excess inventory can be solved in the use of modern technology and techniques, such as inventory management systems.

Which will help in managing surplus cases as well as reduce the losses resulting from them, and this means reaping more profits.

Creative discounts can also help counteract this problem, as they encourage consumers to buy large quantities of items.

Thus helping to increase sales and make up for lost profit margins during periods of inventory surpluses.