Good inventory management is a guarantee of performance for a company. This is essential to ensure the financial profitability of the company as well as customer satisfaction. Indeed, better inventory control makes it possible to have products available to respond instantly to customer requests while avoiding overstocking, which is often very costly. Thus, to properly maintain your stocks, it is recommended to classify them according to functional and operational criteria. So what are the different types of inventory that are most common in warehouses?
Types of stocks according to their function
Most companies categorize inventory according to its function. In such a classification, each type of stock has a purpose. While some are intended to avoid a stock shortage, others aim to optimize storage costs or maximize profits.
Safety stock
Safety stock is used to compensate for unforeseen events such as a spike in orders, a delay in delivery by the supplier or a loss of goods. Supplementing the minimum stock, this quantity of goods makes it possible to avoid a stock shortage.
Safety stock is determined based on the average sales and the length of the period to be covered. It is obtained as follows:
→ Safety stock = average sale x period covered by the safety stock
Alert stock
Alert inventory is the quantity of goods that, once reached, triggers the replenishment process. This order threshold must be higher than the safety stock. It is obtained by the following formula:→ Stock d’alerte = stock minimum + stock de sécurité
Seasonal stock
Seasonal stock is used to anticipate peaks in activity and increases in consumption at certain times of the year. This is the case, for example, with scarves and hats in winter, sandals and swimsuits in summer, or school products before school starts.
Stock in transit
Inventory in transit refers to goods that are no longer in the warehouse. These can be products that are still in the production phase (manufacturing, packaging, etc.) or items that circulate in the marketing, distribution or delivery processes.
Speculative stock
As the name suggests, this type of stock is part of a speculative strategy. It is built up following the purchase of goods in a quantity greater than that which the company really needs. The idea is to take advantage of a temporary price drop or a discount offer; or to anticipate a possible increase in prices on the market.
Dormant stock
This type of stock is a collection of items that have difficulty selling or can no longer be marketed or integrated into sales orders. They occupy storage space, causing unnecessary costs to the company. Several factors can be at the origin of this inactive stock: poor anticipation of demand, a drop in popularity, a change in standards, a change in packaging, etc.
Recovery stock
Recovered stock concerns products that are partially or totally reusable. These are goods that have already left the warehouse and some of which are returned to be used again. An example of this is glass bottles and jars.
Types of inventory according to the operational organization.
Inventory management is part of the daily life of companies. To make things easier, it is also interesting to understand stocks according to operations.
Physical stock
This stock corresponds to the number of items physically present in the warehouse or in the store at a given time. This is the quantity counted in the premises during an inventory. This must correspond to the data mentioned in the accounting documents.
Net stock
Net inventory is the quantity of items in the warehouse without unprocessed sales orders. It is calculated by subtracting from the physical stock the quantity of products requested, but not yet delivered to customers.
Available stock
The on-hand stock is the sum of the current stock in the warehouse and the order that has been placed with suppliers but has not yet been received. This is the quantity of products available for sale.
The optimal stock
Optimal stock provides a good balance between product availability and financial profitability. It helps minimize the cost of storage while meeting the company’s consumption and customer demand favorably. By achieving optimal inventory, the company avoids situations like stock-outs and overstocking.
Every company has its own method of determining this ideal level of stock.
Maximum stock
This is the maximum quantity of products that should not be exceeded due to cost or lack of space. Above this threshold, the company suffers from overstocking which risks penalising its cash flow. It is therefore important to determine the maximum stock by taking into account several parameters: storage capacities, average volume of outputs, costs, budgets, restocking time, etc.
Minimum stock
The minimum quantity of products that the company must have in its warehouse at all times is called “minimum stock”. Keeping this level of stock allows you to cover the needs during replenishment. It is essential to avoid any risk of stock shortages.
Types of inventory according to the lifespan of the products
In logistics management, it is important to treat perishable and non-perishable products separately. Indeed, these two types of goods are preserved in different ways. Therefore, it is useful to also categorize stocks according to the lifespan of the items. We can then distinguish three types of stocks:
* Perishable stock, which includes items that deteriorate over time;
* Non-perishable stock, which includes products with the best longevity and which can be kept for a long time;
* Stock with an expiry date, which refers to products that cannot be sold once the expiry date has passed.
