Stock breakage occurs when the products in stock do not meet the customer’s demand. When this problem occurs, it exerts a negative influence on the supply chain, which decreases the productivity of your business.
Knowing and analyzing stock outs will allow you to effectively manage your inventory. Avoiding or at least reducing the breaks that may occur and maintaining an optimal stock level to meet the demand of your customers.
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What are stock breaks?
In order to understand what is a break in inventory it is necessary to analyze several variables that explain this process. Stock management goes from having all your products identified and catalogued to a proper regular cash closing.
It is a question of logistics, where it is necessary to control the inventory and the distribution network mainly. Sometimes it can happen that a product is in high demand and its stock is quickly exhausted.
In that case, you will need to urgently replenish a quantity that responds to the demand you have at that moment. All with the aim of avoiding a break in stock.
What does a stock break mean?
The main negative consequence of this situation is clearly a loss of income. Similarly, if you do not control the frequency of that stock break, that is, it happens repeatedly, because the inventory is not managed correctly, you will surely lose customers.
If this situation is prolonged over time, consumers of your product will lose the trust they have placed in your brand. Your company can lose the prestige it has gained in a much shorter time than you might have.
That is why it is extremely important to have an optimal stock level that allows you to satisfy all demands. This will be possible with a deep knowledge of the product you offer, the type of customer who consumes it and the flow of the commercial or economic niche in which you are immersed.
What is maximum and minimum stock?
The maximum stock has to do with the largest amount of products present in the warehouse in relation to the costs of what this is equivalent to. This situation is possible when there are low warehouse costs, when an increase in demand is estimated or when the cost of raw materials is likely to rise.
On the other hand, the minimum stock is related to the smallest quantity of goods in stock that respond to the existing demand at a given time. All this to ensure that no break in stock occurs.
Surely knowing what is stock breakage will allow you to manage your inventory effectively, expanding the potential of your business. It is important to keep this situation under control in order not to lose money, customers or the prestige of your company.