Many companies have not had the capacity in the past to examine their stock-holding in sufficient detail to check whether their stock levels are right or not. A computer is in the position that it can do all the detailed calculations in a flash. Here the computer looks for stock items where you could have money tied up because your stock-holding is too high for the demand you are experiencing.
In some industries (like the retail book trade, for example) you are allowed to return stock for full credit within a reasonable time period. If your stock holding is too high, then you could benefit from returning it, or having a special offer to reduce stocks. Either way you can release money that could finance other stock items you might prefer to stock.
In the stock System Profiles you can specify two parameters: a definition of a time period to be used for special stock calculations (weeks, for example) and an "Excess stock number of periods”. A typical number to use as the excess stock period criterion might be "8” (weeks, in this example).
The computer works out if your stock holding for each item would satisfy current demand for more than eight weeks. If so, it reports it to you, showing the requested details.
You can now decide what to do. If the lead-time for this product is very long, you might decide to leave it be.If the estimated demand is much lower than you thought, this might alert you to a change in market conditions, to which you should respond. On the other hand, it may be that stock has been bought to meet a special order — this may reflect in a low free stock quantity — so it is a false alarm.
Article ID: 445
Created On: Mon, Jun 18, 2012 at 2:35 PM
Last Updated On: Thu, Jun 22, 2023 at 11:15 PM
Online URL: https://kb.datafile.co.uk/article/excess-stock-report-stock-control-445.html