Stock management: the ABC analysis (2)

In a previous post we told you about ABC analysis in inventory management, but there is a lot to be said.

We will now focus on developing in depth how to get the most out of Class A products, that is, those that generate the most sales in your business. 

Never overlook the importance of logistics or pricing policy for any eCommerce or physical store. Costs and productivity can be optimized at a very high level.

Once you have done the analysis and identified each of your products in a category, you are in a position to draw up an action plan. I insist that this may take some time, but it is worth it enormously and you will see it in your account of results.

When it comes to making decisions, the logical thing to do is to start at both ends of the scale: first the A's, which generate profits, and then the C's, which may be costing you money.

One is as important as the other. And, moreover, the moment that all this is in tune, we can get down to type B products so that they improve their performance.

It is nothing to compare and search for alternatives that can serve our A products. It is nothing but the law of the market. 

Search for different manufacturers or suppliers and compare prices and conditions. Even if once compared you see that your first option was the good one, do not discard the rest definitely. We never know what may happen in the future.

If there is a price increase, for example, we will always have an advantage to negotiate.

Even though everything goes smoothly, the production capacity is limited and you never want to run out of your Class A's, right? Better to be able to diversify orders among more than one supplier, if necessary.

Always manage a couple of alternatives to ensure you never run out of critical products. 

The truth is that a warehouse is something that seems alive. It evolves, changing, filling and emptying itself according to the demand of the customers.

This is precisely why we say that, for a business to work, it is essential to maintain an efficient inventory management system.

In the case of using ABC analysis, it is basic not to run out of A class products in stock. If it happens, it will cost us money and we will be losing opportunities, our loyal customers will go to the competition and similar situations will occur.

You need to always have a safety stock to be able to use it if necessary at any time. To calculate this, you must take as a reference the average demand and the delivery time, and also evaluate how far our suppliers' deadlines go.

It is also worth investing a little more in security within your warehouse, with surveillance cameras, security locks and an updated inventory that will set off the alarm in case of imbalance.

It is also necessary to control outside your own warehouse. If you have a 3PL logistics partner and, of course, a physical store, the inventory and a complete report of what leaves the store/warehouse at each moment is something to set from the beginning. 

It can be a bit unpleasant to think about this type of situation, but it is better to take it into account and avoid disappointment in the form of theft or disappearance. 

This is not a decision that can be taken lightly.

You have to make a study of the competition to know in which parameters your competitors move and the motivations of your customers. If what moves them most in the purchase is the cost of the product and you have rivals with tighter margins, bear in mind that you run the risk of being out of the market.

This decision has to be taken in a very reflexive way and looking for the balance. Even in the case of having a dominant position in the market and in order not to lose it, you have to be clear that you are providing an additional added value that justifies that increase.

You can rely on resources such as customer service, additional services, personalization... but you cannot give the same as others but more expensive.