How to optimize the storage time in the warehouse?
Keeping inventory for a long period of time in the warehouse makes a company lose money. So how do you optimize storage time in the warehouse in order to order and deliver at the right time? The answers in this article.
Understanding storage time and its importance
Storage time is a logistics and accounting KPI. We need this number to determine the ratio of inventory in storage to inventory sold.
It is very important for a company to know how to manage its inventory well because it allows for better profitability. Indeed, an item that spends too much time in the warehouse is very expensive. And if this is the case, then it means that the company is not managing its stock well or it needs to rethink the way it sells.
What is the optimal storage time?
This question cannot have an exact answer because every company is different. What you should remember, however, is that the optimal storage duration depends closely on the types of products involved.
If it’s perishable items, for example, this time should be only a few days, but for valuable, slow-moving goods like cars, the time may be longer. But in any case, every company should reduce it as much as possible and pay close attention to it.
But apart from the types of products, the storage time also depends on the company’s capital, customer and supplier demand.
Avoiding stock outs and overstocking
In the process of properly managing inventory, a company is at risk of either being out of goods or overstocked. For this reason, consideration should be given to determining the optimal inventory. The optimal stock duration is the one that ensures maximum stock rotation, while guaranteeing the fluidity of product entry and exit
This one makes it easy to meet demand but with low cost. This means that by determining this number, the company avoids being out of stock but also avoids overstocking.
How to manage your stock ?
– Automate your warehouse with a management software: it allows you to be more efficient and more organized
– Plan demand to determine the quantity of merchandise needed to meet sales.
– Review the management methods used, consider just-in-time, which means that only essential goods are managed in the warehouse according to the orders.
Important formulas to know to optimize storage time in the warehouse
– Average storage time = the number of days in the reference period ÷ inventory turnover rate.
– Average stock= (beginning stock + ending stock) ÷2.
– Inventory turnover rate: [Inventory used during the period in quantity or value ÷ ((beginning inventory + ending inventory) ÷2)) also in quantity or value].