Stock Level Optimization

How to Reduce Stock Loss in a FMCG warehouse. 1. Warehouse layout & storage optimization ~ Design zones by function—receiving, high-turn pick, slow-moving, packing, dispatch—to reduce movement and errors ~ Use ABC analysis (focuses on the top 20% worth 80% of revenue) to place A-items near packing and shipping. ~ Embrace vertical storage and double-deep racking for better density while keeping high-turn products accessible. 2. FIFO & cycle counting Apply FIFO to avoid spoilage and FIFO/LIFO for non-perishables Implement frequent cycle counts based on ABC prioritization to catch discrepancies early and avoid disruption. 3. Tech integration: WMS, barcodes, RFID Use barcode/RFID systems and a WMS to track stock in real time from inbound through to dispatch Automate reordering based on real-time stock data to maintain correct inventory levels. 4. Receiving & put‑away control Double-check incoming items against POs, scan them on arrival, inspect for damage, then assign proper locations immediately Separate staging area to avoid mix‑ups and bottlenecks 5. Staff training & accountability Train staff on SOPs, handling secure scanning, stock rotation, FIFO, and equipment safety Foster accountability via cycle-counting ownership and KPI tracking. 6. Security & shrinkage prevention Use CCTV on docks/storage, restricted access for high-value zones, and random audits to deter loss Investigate and resolve root causes of any variances—mistakes, theft, or system errors 7. Forecasting & supplier collaboration Apply demand forecasting and safety stock buffers to avoid both overstock and stock outs. Consider vendor-managed inventory (VMI) or CPFR to smooth replenishment cycles and reduce buffer needs. 8. Continuous improvement Use data from your WMS to monitor inventory accuracy, pick rates, and variance trends. Update layout, SOPs, KPIs and tech based on these insights. Empower staff feedback and regular reviews to drive incremental gains. ✅ In summary By combining smart design, disciplined inventory practices, tech-enabled accuracy, trained staff, and data-driven reviews, you can drastically reduce variance in FMCG stock levels—supporting better margins, service, and compliance. Let me know if you'd like sample SOPs, WMS options, or help adapting this roadmap to your facility!

“Don’t Just Stock It—Make It Count: The MBQ , Availability and Fill Rate Advantage.” In retail, the key to success lies not just in stocking products, but ensuring that the products are adequately stocked is critical for driving sales. Understanding critical inventory metrics—Minimum Base Quantity (MBQ), Availability, Fill Rate—is essential to optimizing sales and meeting customer expectations. Further to truly make an impact, these metrics must be applied at the assortment level. 🔹Minimum Base Quantity (MBQ): Units required on the shelf to maintain product visibility and meet customer demand. It’s not enough for a product to be “available”—it needs to be sufficiently stocked to catch the customer’s eye and drive purchases. It’s a critical measure, its true value is realized when applied to specific assortments that cater to different customer preferences. Ensuring each assortment meets its MBQ helps guarantee that the diverse needs and choices of customers are adequately addressed. 🔹Availability: Is more than just having a product on the shelf—it’s about meeting a set percentage of the MBQ (e.g., 75%) to ensure the product is impactful. If the stock falls below this threshold, the product might as well be considered “unavailable,” as its impact on sales diminishes sharply. Customers expect a range of options within an assortment, and if one part of the assortment is understocked, it can lead to a perception of unavailability even if other products are present. Focusing on availability at the assortment level ensures that all customer needs are met, not just those for the most popular items. 🔹Fill Rate: This measures how well we are meeting customer demand from your current stock, Overall fill rates can be misleading if they don’t reflect the availability of specific products within an assortment that address different customer needs and preferences. By monitoring and optimizing fill rates within each assortment, you can ensure that every customer finds what they’re looking for. 🔸Loss of Sale: When availability falls below the MBQ threshold at the assortment level, you’re not just risking a poor shelf presence—you’re also risking direct financial loss. The loss of sale is calculated by comparing potential sales (based on historical average daily sales) with actual sales on days when availability was low. This analysis can help in minimizing missed revenue opportunities. 🔸Backend Operations: A robust backend—covering vendor fill rates, warehouse stocking, and supply chain speed—is essential for sustaining high MBQ fill, availability, and fill rates at the front end, directly impacting your ability to meet demand and minimize loss of sales. 🔸Benchmarks: Varies between a fashion rand a grocery retailer due to differences in product types, demand patterns, purchase frequency and customer expectations - 1. Fashion Retailer • Availability: 85-90% • Fill Rate: 90-95% 2. Grocery Retailer • Availability: 95-99% • Fill Rate: 98-99%

Sales and Stock Forecasting: In FMCG In the context of Fast-Moving Consumer Goods (FMCG), SSF usually stands for Sales and Stock Forecasting. This involves predicting future sales and managing stock levels to meet customer demand efficiently. Here’s how SSF plays a critical role in FMCG: 1. Sales Forecasting - Demand Prediction: Estimating future customer demand based on historical sales data, market trends, seasonal variations, and promotional activities. - Promotional Impact: Forecasting the impact of upcoming promotions, discounts, and marketing campaigns on sales volumes. - Sales Channel Performance: Predicting sales across different channels (e.g., retail, online, wholesale) to allocate resources and stock effectively. 2. Stock Forecasting - Inventory Management: Ensuring that the right amount of stock is available to meet predicted sales without overstocking, which can lead to high holding costs, or understocking, which can lead to stockouts and lost sales. - Supply Chain Coordination: Aligning stock levels with supply chain activities to ensure timely replenishment, considering lead times, supplier reliability, and logistics. - Shelf Space Optimization: Managing stock levels to optimize shelf space in retail environments, ensuring high-demand items are always available and minimizing space for low-turnover products. 3. Key Factors in SSF for FMCG - Data Accuracy: High-quality, up-to-date data is essential for accurate forecasting. This includes sales data, market trends, consumer behavior, and external factors like economic conditions. - Technology Integration: Utilizing advanced forecasting software and data analytics tools to enhance the accuracy and efficiency of SSF processes. - Collaboration: Cross-functional collaboration between sales, marketing, supply chain, and finance teams to ensure alignment on forecasts and strategies. - Agility and Flexibility: The ability to quickly adjust forecasts and stock levels in response to changing market conditions, unexpected events, or shifts in consumer behavior. 4. Benefits of Effective SSF in FMCG - Improved Customer Satisfaction: Ensuring that products are available when customers want them, reducing the risk of stockouts. - Cost Efficiency: Minimizing overstocking and associated costs while avoiding lost sales due to understocking. - Enhanced Decision-Making: Providing data-driven insights that inform sales strategies, marketing campaigns, and supply chain planning. - Competitive Advantage: Being able to react swiftly to market changes and consumer trends, giving the company an edge over competitors. In FMCG, where products move quickly and customer preferences can change rapidly, effective SSF is crucial for maintaining smooth operations and achieving sales targets.

🚀 6 Inventory Control Techniques for Stock Optimization Let’s face it—managing stock in FMCG is like walking a tightrope. Too much? You’re bleeding money. Too little? You’re losing customers. That’s where Inventory Optimization becomes a game-changer. So what is it? 📦 Inventory Optimization = Keeping the right products, in the right quantity, at the right place — without locking up your cash or running out during peak demand. 🧠 Here are 6 smart techniques to help you optimize your stock and increase ROI: 📊 1. Stock Audit "If you don’t know what you have, how can you manage what you need?" Regular audits reduce shrinkage and ensure your system matches reality. ✅ Physical Inventory: Full stock count (usually yearly) ✅ Cycle Counting: Monthly/weekly checks by item groups ✅ Spot Checks: Surprise inspections to catch issues early 💰 2. Inventory Budgeting "Plan your stock before it drains your wallet." Set monthly or quarterly budgets for stock procurement. Use past sales, upcoming promotions, and supplier trends to decide how much to spend. ⏱️ 3. Just-In-Time (JIT) "Stock only when needed — not too early, not too late." Keep minimal stock and reorder based on real-time needs. Ideal for predictable SKUs and strong supplier chains. 🔠 4. ABC Analysis "Not all products deserve the same attention." Classify inventory by value to manage smarter: 🅰️ A-items = 10-20% of items, 70-80% of value → tight control 🅱️ B-items = 20-30% of items, 15-25% of value → medium focus 🆑 C-items = 60-70% of items, 5-10% of value → basic control 📈 5. Demand Forecasting "Predict better to prepare better." Use past sales + trends + seasonal changes to plan future stock. Forecasting avoids overbuying slow movers and missing out on fast sellers. 🧠 Tip: Treat every SKU differently based on value and demand pattern. 🏗️ 6. Organizational Planning "Inventory doesn’t exist in a vacuum — plan it across levels." 🧭 Strategic: Where will goods be made? Where stored? 🛠️ Tactical: How much should we produce and when? 📦 Operational: How do we execute this? (ERP, logistics, reordering) #FMCG #InventoryManagement #SupplyChain #BusinessGrowth

🚀 Optimizing Inventory in Engineering Stores: The Metrics That Matter🚀 Can you calculate Min/Max of your spares??? Balancing inventory in an engineering store can be a game-changer. Stock ties up capital, but shortages can mean costly downtime. Setting the right minimum and maximum levels can significantly impact cash flow and the core working capital of an organization. Here are the key metrics and formulas that keep things running smoothly! 1. Lead Time Demand – Stock for the lead time (time it takes to restock).     Lead Time Demand = Average Daily Demand × Lead Time (in days) ⏳ 2. Safety Stock – Your buffer against demand spikes and supplier delays.     Safety Stock = Z-score × √(Average Lead Time × Variance in Demand) 🔒 3. Reorder Point – When it’s time to reorder, factoring in demand and safety stock.     Reorder Point = Lead Time Demand + Safety Stock ⏰ 4. Average Demand & Demand Variability – Understanding demand patterns makes stocking accurate and cost-effective.     Average Demand = Total Quantity Used ÷ Total Time Period     Standard Deviation of Demand = √(∑(Xi - Average Demand)² ÷ N) 📊 5. Service Level – The probability of meeting demand during lead time, using Z-score to guide safety stock. 🏆 6. Economic Order Quantity (EOQ) – Optimize order size to reduce holding and ordering costs.     EOQ = √(2 × Demand × Order Cost ÷ Holding Cost) ⚖️ 7. Maximum Stock Level – Cap inventory to avoid excess and ensure cash flow.     Maximum Stock Level = Reorder Point + EOQ 💵 Maintaining optimal minimum and maximum stock levels isn’t just about having parts on the shelf – it directly influences cash flow by reducing capital tied up in excess inventory and keeping working capital available for core operations. 🌟 By strategically managing inventory, we ensure that resources are allocated efficiently, freeing up cash for other critical investments. 🔧 Engineering and operations pros, these formulas make a difference in performance and cost. Which metrics are essential to your strategy? Share your thoughts below! 👇 #InventoryManagement #EngineeringExcellence #SupplyChainOptimization #OperationalEfficiency #MaintenanceManagement #Engineering #CashFlow #WorkingCapital

Understanding Re-Order Point (ROP) in Inventory Management: Efficient inventory management strikes a balance between avoiding stock outs and minimizing overstock. A key concept in achieving this balance is the Re-Order Point (ROP). The ROP tells you the precise inventory level at which you should reorder stock to maintain seamless operations ROP Formula: ROP = (Lead Time Demand) + Safety Stock 1. Lead Time Demand: This is the amount of inventory you use during the lead time (the time it takes to receive new stock after placing an order). Example: Suppose your business tentative sales 100 units of a product per day. Lead time (time to receive new stock) is 10 days. Calculation: Lead Time Demand = 100 units/day × 10 days = 1000 units 2. Safety Stock: Safety stock is extra inventory kept to cover unexpected demand or delays in delivery. Here's a simplified way to calculate it: Formula for Safety Stock: Safety Stock = (Maximum daily demand × Maximum lead time) - (Average daily demand × Average lead time) Example: Maximum daily demand is 120 units. Maximum lead time is 15 days. Average daily demand is 100 units. Average lead time is 10 days. Calculation: Safety Stock = (120 units/day × 15 days) - (100 units/day × 10 days) Safety Stock = 1800 units - 1000 units = 800 units 3. Calculating ROP: Now, using the ROP formula, we can calculate when to reorder. ROP = Lead Time Demand + Safety Stock ROP = 1000 units + 800 units = 1800 units Why is ROP Important? 1. Avoid Stock outs: By reordering when stock levels reach 1800 units, you reduce the risk of running out before new inventory arrives. 2. Optimize Inventory Levels: Calculating safety stock and lead time demand accurately helps maintain the right balance—avoiding excess inventory and ensuring efficient cash flow.

How to Optimize Inventory? Here are 13 parameters & 5 levels I recommend mastering. ⭐️ Simple Min-Max Parameters Using the 7 parameters below, you can set up a simple "Min-Max" inventory replenishment system, which triggers an order when inventory hits a minimum and replenishes it to a maximum level.  This method is very efficient for short lead times (as explained in my previous post) 1️⃣ A Clean & Clear Item List Keep your item list updated with active, discontinued, and new products. Use proper codes, product trees, and categories. Most of the companies don't have a clean up-to-date item list 2️⃣ Available Stock + Transit Track both physical and in-transit stock. Inventory accuracy is critical—if it’s wrong, everything is. 3️⃣ Inventory KPIs Focus on metrics like inventory turnover, service level, and SLOB (Slow/Obsolete). 4️⃣ Average Sales (Level) Calculate the daily average of past sales, adjusting for stockouts. Pick the period based on lead time and volatility of your demand. 5️⃣ Average Lead Time Reliable lead times are essential. Inaccurate lead time = inaccurate model. 6️⃣ Lot Size / MOQ Know your lot sizes and Minimum Order Quantity (MOQ). Many businesses overorder due to large MOQs. 7️⃣ ABC Analysis Identify your most profitable product groups and prioritize accordingly. ⭐️⭐️ Dynamic Min-Max By adding the following 2 parameters, you can create a Dynamic Min-Max system, which adjusts thresholds based on-demand and service rates. 8️⃣ Target Service Rate Set service rate targets for each product group, prioritizing "A" items over "C" items. 9️⃣ Seasonality Incorporate seasonality to anticipate high-demand periods and avoid excess stock afterward. Like Xmas Peak for example. ⭐️⭐️⭐️ Dynamic Safety Stock Use these 3 parameters to establish a dynamic safety stock system. Very usefull for long lead time supply. 1️⃣0️⃣ Economic Order Quantity (EOQ) EOQ helps find the right balance between transaction and holding costs. 1️⃣1️⃣ Demand Uncertainty Estimate demand uncertainty to calculate safety stock and classify items using an ABC-XYZ matrix for example. 1️⃣2️⃣ Supplier & lead time Uncertainty Estimate supply uncertainty (lead time, suppliers) and calculate safety stock accordingly. Reduce uncertainties at their source. ⭐️⭐️⭐️⭐️ Better Forecast Accuracy 1️⃣3️⃣ Accurate Forecast You don"t need demand forecast to manage inventory. But having an accurate forecast will simplify your life. If demand uncertainty is high, work on improving forecast accuracy. ⭐️⭐️⭐️⭐️⭐️ More Advanced Models Innovation & Machine Learning (optional) Once the above 13 parameters are automated, explore advanced statistical methods and machine learning (but only if your data is accurate; otherwise it will be worse) Let me know what you think in the comments! How many parameters do you use? Edouard PS: Check the resources in my bio to learn how to master implement these parameters by next week #supplychain #inventorymanagement