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What is Stock Management? (& How to Get Started)


Stock management is the process of tracking the goods you want to sell, through from acquiring them, to storing, and ultimately selling them, as well as optimising your part of the supply chain. It’s also known as inventory management. 

Good stock management goes hand in hand with good sales forecasting; if you’re able to start predicting what you’ll sell, when you’ll sell it, and in what amounts, this all makes stock management a lot easier, and means you’re more likely to avoid over- or under-stocking, or ending up with dead stock.

What it boils down to is stock efficiency; the easiest way to make the most money from your stock, while spending the least amount of time organising it, in as little storage space as possible.


What does ‘good’ stock management look like?

Stock management is all very well and good in theory, but it can often sound just like that — a vague theory. 

So what does effective stock management actually look like in practice? Why is it worth your time, whatever your size?

Let’s paint a picture of how life looks when you nail your stock management:

  • You’re keeping a relatively small amount of stock in storage, but your products aren’t going out of stock
  • Products move through your business quickly; things don’t hang around in your stock room, or on your shelves, for long 
  • You feel you have a good grasp of what you have in stock at any given time (and how long it's been there) 
  • And ideally, you have a reliable way to check this quickly when needed
  • Your stock room, warehouse, or wherever you store your stock, is neat and organised
  • It’s easy to find what you need when you need it 
  • Products are stored safely, and don’t often get damaged
  • Your online store and your physical store systems sync up, so you’re not accidentally selling things twice
  • Very little of your stock becomes ‘dead stock’, i.e. is lost to damage, goes out of date, or just doesn’t sell for an extended period of time (to the point where it seems unlikely it ever will)
  • You have a clear understanding of which of your products are driving the most profit, and therefore need the most attention

📚 Bookmark for later: How to calculate stock turnover


Where to start with your stock management

Stock room a mess? Don’t worry, we’ve all been there. Let’s get you on track. 


1. Do a stocktake 

A thorough stocktake will tell you exactly what you have to start with, so you can get a good system in place going forward, free from errors and confusion.


2. Choose a tracking tool

If you don’t have an inventory management system in place, now’s the time to set one up. As a small business, you might not think inventory management software is necessary or cost effective — but there are plenty of options for businesses of all shapes and sizes, including ones to track raw materials alongside finished ones (if you make your own products).


3. Go for FIFO 

FIFO stands for ‘First in, first out’. It’s an accounting approach that assumes, when valuing your current stock, that you sell your oldest stock first. 

And more often than not, this approach makes the most sense for your inventory management, too, particularly if any of your goods have an expiry date. 

So set up a storage system that makes operating on the ‘FIFO’ principle second nature, by storing newer stock behind older stock, as well as labelling and recording it all carefully.


4. Don’t treat all your inventory equally

If you’re still overwhelmed at the idea of overhauling your whole inventory process, try starting with just one product category, or product line. 

Pareto’s Principle says that 80% of outcomes from 20% of causes. And while the percentages might not quite align, you will have products in your assortment that are driving more than their fair share or profit, or have a much higher sell-through rate. So if you work on those products first (storing them better, streamlining your restocking better, etc), you’d see the biggest impact.


Why to negotiate returns clauses & consider taking stock on consignment

However good your forecasting is, you need to work on the basis that you won’t sell all your stock. So how do you prevent it from going dead? There’s plenty you can do to help long before you get your hands on that first box.

Where you can, negotiate a return clause. This is hugely helpful, especially when you’re selling something new, and don’t have past data to rely on. Wholesale distributors may offer this as part of their agreement with you (although it’ll likely come with a squeezed margin). 

When you’re stocking a bookshop, all the major book distributors offer the option to return a percentage of your stock each month for credit (if you’re buying in direct from the publisher instead though, this is worth checking).

And here at CREOATE, we offer 60-day returns on orders you place with brands you haven’t bought from before, so you can take the risk out of trying new things. Just send any unsold stock back to us for a refund.

👋 Not shopping wholesale with CREOATE yet? Shop over 6,500 wholesale brands in one place, with 60-day returns available. Start browsing.

Working with a small local supplier or artist for the first time? Ask to take a small number of their products on consignment. This is kind of like an alternative returns agreement; if you take products on consignment, the supplier is basically placing them in your store for a set period of time, and will then invoice you for what has sold, and take back what hasn’t. 



Perpetual vs. periodic inventory systems: what’s the difference?

With a ‘perpetual’ inventory system, your inventory record is continuously updated (after each transaction, etc), so you know the numbers you’re seeing are accurate at any given time. With a periodic system, it’s updated every time a physical count (stocktake) is carried out, so your data doesn’t typically reflect the actual product count in your business at that moment.


What is a method of stock management? 

If you want to really get under the hood of stock management theory, there are plenty of different methods to explore. The ‘Just In Time’ (JIT) inventory management method, for example, works on the basis of getting in just what you need, just before you need it — whether that’s materials to make products, or the end products themselves. It’s super efficient, but risky — one tiny delay, or unexpected spike in demand, will quickly land you in hot water.

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