Stock balance at points of sale

Inventory stock levels are critical to the success of retail companies. Maintaining the right stock balance between supply and demand is critical to satisfying customers, maximizing sales and minimizing operating costs.

Insufficient stock can lead to stock outs and customer dissatisfaction, while overstocking can lead to additional costs and storage problems.

Point of sale management

We start from point-of-sale management, also known as POS, as the indispensable commercial factor from which to start when looking for stock balance.

Why focus on point-of-sale management?

• Improves product presence and display
• Ensures availability on the shelves
• Ensures that products are in the best possible condition
• Motivate and seduce consumers
• Monitor competitors’ products

Key Performance Indicators (KPIs) for stock balance

But to know if we are doing things right, it is necessary to have performance indicators (KPI’s) that give us a diagnosis of how we are doing things, and serve us to identify areas for improvement related to inventory.

Some of the main KPIs:

• Stock turnover: measures the number of times inventory is sold and replenished during a given period.
• Stock coverage: indicates the period during which current stock will cover future sales.
• ABC analysis: classifies products into three categories (A, B and C) according to their importance in terms of sales and profitability. This allows retailers to focus on the most important products and adjust stock levels accordingly.
• Demand management: this involves predicting future demand and adjusting stock levels to meet it. This may include the use of sales analysis tools and collaboration with suppliers to ensure adequate supply.
• Other supply chain KPI’s: involves indicators that serve to evaluate the efficiency of the supply chain, such as reduction in lead times or % variation in warehousing costs.

Benefits of the ideal stock balance

You already know why you should optimize your point of sale management and how to measure it, now we tell you the benefits you will receive in the medium and long term once you start implementing your strategy:

• Customer satisfaction: by having the right stock, you guarantee better customer service, avoiding lost sales due to lack of inventory
• Storage space optimization: by maintaining the right stock level, you avoid excess inventory that could reduce warehouse space and increase storage costs.
• Profitability improvement: by balancing stock, losses are minimized and profits are equalized, contributing to higher business profitability.
• Reduced financial costs: by maintaining a balanced stock, unnecessary investment in excess inventory is avoided, reducing associated costs.
• Efficiency in the supply chain: by maintaining an adequate stock balance, efficiency in the supply chain is improved and supply problems are avoided.

Problems caused by overstock

And what can happen when there is an imbalance in your point of sale due to overstock? The following:

• Increased storage costs: overstock leads to higher storage and space costs, which affects the profitability of the business.
• Deterioration of stock: excess inventory can result in expired or spoiled products, which generates losses for the company.
• Fixed capital: excess stock represents an investment that does not generate cash flow or profits, which affects the company’s liquidity and profitability.
• Obsolescence risks: excess inventory can lead to product obsolescence, especially in sectors with rapid technological evolution or changes in consumer trends.

Problems caused by stock-outs

At the other extreme, when, due to poor stock management at the point of sale, there is a lack of the product that customers demand, the opposite effect occurs, although with equally disastrous consequences: stock outs.

Here are the main problems caused by stock-outs in your stores:

Loss of sales: when a product is not available in inventory, sales opportunities are lost, which directly affects the company’s revenue.
Decreased customer satisfaction: the unavailability of a product can generate dissatisfaction among customers, which can affect their perception of the brand and their loyalty.
Damage to brand image and perception: stock-outs can generate a bad image of the company, as customers may perceive the brand as unreliable or unable to meet their needs.
Customer migration to competitors: when a product is unavailable, customers may choose to look for alternatives from competitors, which can result in loss of market share.
Problems in the supply chain: stock-outs can be a symptom of problems in the supply chain, such as poor planning, lack of communication between areas of the company or errors in estimating demand.

Now you know everything you need to know about stock balance in retail outlets. Remember, the key is good prior planning of the demand in your stores, because with anticipation and organization, efficiency is guaranteed.

And if not, you can always turn to Artificial Intelligence to help you, which we know a little about. Want to know more? Find here all our AI solutions for Retail.