November 29, 2022

Why You Don’t Always Need to Check On Hand Stock

What about the production tomorrow? Are materials available?

Do you know what these kinds of questions are? I’m sure some of you have heard of it.

But is it wrong to ask such a question?

In fact, neither.

Next, do you have to always know how much stock you have now? Will it be enough to make things the next day? Do you have to keep track of how much stock you have all the time?

No, that’s not true. You don’t have to keep an eye on your stock all the time. You don’t have to worry about that to make sure you have enough raw materials for your production.

If you ask the same question, “How much stock do you have for the next production?” it could mean any of the following.

(Often) something doesn’t go as planned

How come I can say that?

You must have a plan for what, how much, and when you will make. Some of the materials you need have also been ordered, along with everything else you have set up. So, if everything goes as planned, you can be sure that you will have enough inventory to meet the needs of production.

on hand stock

You shouldn’t check how much stock you have every now and then. Instead, you should check to see if the materials are coming in as planned. If everything goes as planned, it means that there will be enough supplies. If the supplier doesn’t deliver on time, you might run out of raw materials.

Also, it’s important to remember that it’s not enough for things to go according to plan; they must also be in the right amount and meet your standards for quality and quantity.

If you take care of that, you won’t have to spend too much time checking the stock you have on hand.

So, you don’t control whether or not the stock is available. Instead, you control the things that make the stock available or not.

What affects the amount of stock that is available?

Let’s see.

But before you do that, make sure you’re also part of the scmguide telegram channel, where I share a lot more information about supply chain management.

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There are four things that affect how much stock is on hand

On time production schedule

To find out if you will have too little or too much material, all you have to do is see if your production goes as planned or not.

Why is that?

Because if your production goes as planned, the amount of materials you use will also match what you thought it would be. So, your stock estimate for each period will be correct, since it will be based on the stock you already have.

You don’t have to worry about your stock on hand as long as production goes as planned. Just make sure that your production goes as planned.

Getting materials from suppliers on time

This is also a factor that affects how much stock you have on hand. Instead of checking your stock all the time, it would be better to spend your time and energy making sure the supplier delivers the materials you ordered on time.

If you can do that, what you already have on hand will be enough to meet your needs.

Good results from production and good materials from suppliers

Your supplier gives you what you need when you need it. Plans for production are being followed. All of that doesn’t matter, though, if the materials and products made aren’t good.

Yes, your needs are met in terms of the amount. But you still can’t use or sell it because it’s not good.

Well, the next step to making sure you always have enough stock on hand is to keep the quality of the materials your supplier sends and make sure that the products made by your production line still meet the quality standards that have been set.

If you can do this, you won’t have to keep checking to see if you have enough stock on hand.

Accurate sales forecast

This one factor can’t be kept 100% accurate, but if you can keep making it more accurate over time, you can also get a better idea of how your stock is doing.

Conclusion

Some of the above things can change the amount of stock you have on hand.

In fact, you don’t always have to check how much stock you have right now. On-hand stock is a number that you can figure out, or make a prediction about, based on what you know about the future plan.

What you really need to do is figure out how much stock you will have on hand in the future based on the four factors listed above: the production plan, the material receipt plan, the assumed quality ratio of materials and products, and the accuracy of sales. Then, and this is the most important part, you need to keep all the plans running at 100%.

This means that you have used your time and energy on the things that really matter. Things that change how much stock you have on hand. Because knowing how much stock you have on hand is useless if you don’t do anything to keep it, right?

Hope it helps!

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Dicky Saputra

16+ years of experience in supply chain management. I help companies improve their end to end supply chain performance.

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