If the company has a large warehouse or multiple warehouses, there is a high probability that it may be overstocking. When a large warehouse is empty, the standard practice is to place replenishment orders without analyzing if it is required.
Pro Tip
- If multiple warehouses exist, eliminate one or two and see the magic on inventory and Costs.
- Confine half of the warehouse to be used only during Diwali or other festive seasons.
Avoid Stock Dumping by Vendors
Stock dumping can happen in two ways.
- Supplier requirement to buy all sizes/variants of the product.
If you are buying a shirt, some vendors may require you to buy all the sizes of that shirt. This will eventually lead to excess stocking of non- moving sizes
Pro Tip
Identify these kinds of arrangements with the vendors and re-negotiate with the vendor.
- Delivering more than ordered or different items from what was ordered. In some cases, vendors willfully or erroneously deliver more products than the actual order or ship slow-moving products similar to the ones ordered but not exactly the same.
If you order 1000 pcs of an item, it is not a rare event for vendors to deliver and invoice you for 1050 pieces. The Process may not be in place to identify the excess pieces, or even if identified, you may accept it since the excess delivery is just 50 pcs. In the long term, this leads to stock accumulation
