What is Stock Rotation and Why is it Important for Small and Medium Warehouses?
Stock rotation is a fundamental aspect of warehouse management, particularly crucial for small and medium-sized warehouses.
Stock rotation, often executed through the First In, First Out (FIFO) principle, ensures that products are used and sold in a specific order, minimising losses due to obsolescence or spoilage. Small and medium-sized warehouses, with limited resources, are especially vulnerable to the adverse consequences of improper stock rotation.
Understanding stock rotation principles in warehouse management can also provide insights into the dynamics of the stock market, offering investing opportunities for accredited investors.
Just as FIFO ensures products are utilized efficiently, investors can apply similar principles to their portfolios, prioritizing assets based on their entry into the market. By strategically rotating investments, accredited investors can mitigate risks and optimize returns, minimizing losses akin to obsolescence or spoilage in warehouses.
In this article, we explore the benefits of proper stock rotation, various methods, and essential tips to maintain an efficient rotation system. Additionally, we address common challenges faced by businesses and provide insights on how to overcome them.
What is stock rotation?
Stock rotation (SR) is a way to organise and manage inventory in a warehouse.
This way, products can be sold and used in a specific order to reduce the potential for product loss or spoilage. No matter how fast your product moves, rotation is essential to prevent costly losses from obsolete or out-of-date products. When losses occur, they hurt the bottom line, but worse yet, they are self-inflicted losses.
Failure to rotate inventory increases the risk of being unable to sell the product, having to sell the product at a reduced price, and, worst yet, you may have to pay someone to take the product that was supposed to make you money.
These events are crushing for any business, especially for small and medium-sized warehouses that cannot afford to take on these losses.
The benefits of proper stock rotation
Warehouse organisation is essential for maintaining the efficiency of any inventory operation. Challenges certainly exist when it comes to implementing a sound stock rotation system.
There will inevitably be fluctuations in demand from existing and potential clients from one day to the next. However, a good stock rotation strategy can go a long way toward minimising these challenges and ensuring a seamless and positive customer experience.
Warehouse stock rotation methods
The most common method of stock rotation is using the FIFO (First In, First Out) principle.
FIFO involves picking the oldest products first and placing new inventory towards the back. By following this system, businesses can ensure that the products in their inventory are as fresh and up-to-date as possible. This rotation is crucial for perishable goods, like food or pharmaceuticals, which may lose their quality over time.
In addition to FIFO, businesses can use several other methods to keep track of stock rotation. Some techniques include using barcode scanning and inventory management software, creating structured storage systems, and implementing regular stock checks to detect any issues.
Alternatively, LIFO, or “last in, first out,” is based on the same assumption but reverse chronological. Gravel from a landscaping company is a product that might follow LIFO. The product doesn’t expire, and the convenience of using the newest inventory is more beneficial than rotating the stock.
Of the two, FIFO is the most commonly used stock rotation method. This reasoning to rotate perishables is obvious, but why go through all the efforts on items that will not spoil?
- Suppliers change – suppliers may update their product, packaging, or branding. For this reason, using the oldest products first ensures a consistent customer experience.
- Technology changes – from firmware upgrades to capabilities, technology continues to change rapidly. Failure to rotate electronics can impact warranties and disrupt the installation experience with time-consuming downloads or, worse yet, a failed installation resulting in a customer return.
Not all customer returns are due to improperly rotating inventory. The convenience and acceptance of returning products have resulted in a reverse logistics boon which is extremely costly for warehouses. Warehouses that reduce avoidable customer returns will have a considerable advantage over the competition.
How to implement stock rotation in your warehouse
Once you decide which approach works best for your business operations, you can begin planning how the stock rotation will work within your warehouse. Warehouses typically use picking locations and overstock locations. As picking locations empty, they get filled with overstock. The oldest overstock is directly over the picking location in a perfect world.
If you have ever tried to organise a CD or DVD collection, you sympathise that this is no easy feat. Products that move faster require more overstock locations, and it is inefficient to be moving pallets around overstock locations constantly.
A warehouse management system (WMS) is the most efficient way to implement proper stock rotation. A WMS will allow users to set up rules and automate processes, such as customer order picking or inventory management. A tracking system can save time and ensure accuracy, making stock rotation much easier to manage in your warehouse.
Proper labelling and flow-through pallet racking can also help streamline your stock rotation process. Employees can visually identify the oldest products to pull from overstock and place them in the picking location.
For lower-volume items, gravity-fed systems or carton flow racks allow you to place newer stock in the back, which pushes older stock upfront or the order selector.
While less efficient than a warehouse management system, these methods are still effective in managing your inventory and improving the likelihood that all products rotate. Both are inferior to a WMS that guides picking because they are more susceptible to human error.
Tips for maintaining an efficient and effective stock rotation system
Maintaining an effective and efficient rotation system is a vital component of any business that relies on inventory for its operations. Keeping track of current stock levels and rotation patterns prevents products from becoming old or expired.
Several tips and tricks can help with this process, including labels, bins, WMS systems, and cycle counting.
The first step in maintaining a stock rotation system is properly labelling your incoming products. Whether you use barcodes or stickers, labels provide an easy way to identify and track items as they come in. Creating a standard product label with item number, quantity, and date ensures consistency upon receipt.
Many WMS systems generate these labels upon receipt. This capability makes assigning them to specific locations within your storage area easier and allows you to scan them for bin moves or shipments.
In addition to labels, bins or other types of containers are also essential for managing inventory. These allow you to store multiple items in one location, making it simple and fast to count or check on a particular product at any time.
Placing overstock behind the picking bins is a measure to ensure order selectors consume the oldest product first. Using different-coloured containers can also be helpful for quickly distinguishing between different categories of products or departments within your business.
Warehouse Management System
Another critical component of effective inventory management is a reliable and up-to-date WMS system. This software allows you to input information about all incoming items. It also alerts for low inventory levels or expiring dates so you can take action before running out of needed stock or having something go bad unexpectedly.
Finally, integrating cycle counting into your regular processes can further streamline inventory management by allowing frequent counts without too much additional work or disruption. The counting process should include verifying stock is rotated and reporting any concerns.
With these tips, businesses can better maintain an efficient stock rotation system with enough products on hand while preventing waste and lost profits due to outdated products or mismanagement issues.
Common challenges with stock rotation and how to overcome them
Businesses must overcome common challenges regarding stock rotation to run an effective and efficient operation. For example, human error is one of the biggest obstacles, as small mistakes can significantly impact a company’s inventory management strategy.
Additionally, there may be variances in customer preferences or shifts in demand that require businesses to be responsive and agile. Lastly, rotating stock using a spreadsheet or some other manual process wastes resources.
Stock rotation is a crucial process in any warehouse or storage facility. When done correctly, rotation can save your business money and improve the customer experience! There are manual ways to rotate inventory, but each method is prone to human error.
The best way to ensure proper stock rotation is through implementing a WMS like the solution from Datapel. Our affordable and easy-to-use WMS is perfect for small and medium-sized warehouses and distribution centres.
Contact us today to learn more about our inventory management solutions!
In my role, I oversee the development of insightful blogs that delve into the intricacies of warehouse management. Each piece reflects my dedication to empowering businesses through informative content. Through my team’s extensive experience in the industry, we aim to bring clarity to the complexities of WMS, helping businesses make informed decisions.
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Cheers to innovation, efficiency, and the exciting world of warehouse management!