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Overstock Definition And How To Prevent Overstock In The Warehouse

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Overstock
Overstock, image by freepick.com

How does a warehouse head find how to cope and prevent Over stock in the warehouse? Check out and read the following articles so that you become more understanding and understanding of these ways.

Today, healthy companies are continuously innovating and seeking a breakthrough in handling material management issues. One of them is to tighten the condition of stock level materials and raw materials in the warehouse of the raw material warehouse because with the conditions of the stock level safe and not over then the balance sheet will be healthy and the cashflow company also becomes seamless.

Why do many companies nowadays apply these rules? Because overstock can be deadstock in the future, and it is very dangerous for the company. To know more detail let's check out the following article.

A. WHAT IS MEANT BY OVER STOCK?

Overstock definition is a condition where the stock of goods in the warehouse raw material is in a number that exceeds the needs of the production in addition to the buffer for safety.

Excessive stock conditions even in the overstock levels certainly have a bad impact on the management of warehouses in general because it needs a lot of effort and additional activities to manage it. All that should be avoided so that the employee's work in the warehouse section of raw material will be more efficient. Now, this is not the clock again using a secure search method.

The meaning is that no more time of spending method for the production process needs one or two months ahead. This outdated method, on the one hand, is a good idea for the availability of materials and raw materials for production. But the downside is that the company must provide extra funds for the shopping of these items. If the amount is too large it affects the company's cash flow.

Cash flow
image by freepick.com

Currently, the method that is being developed is the JIT (Just In Time) method, meaning the arrival time of goods production needs in the try arrived or sent to the factory when the production process will already run. The challenge is certainly very heavy considering the constraints in the supply chain that are full of uncertainty. But if you want to survive and continue to survive the competition with the competitors, then inevitably all the employees involved in the activity must be in the form and change the way it works. 

Can the JIT method be applied successfully? The answer can of course. One of the companies that developed this method is TOYOTA Inc. The Japanese company has become a model roller for other companies in the application of this JIT method.

B. FACTORS CAUSE OVER STOCK 

Several factors can trigger overstock. We need to know that the basis of order calculation of goods that are done by the supply chain is forecast or sales plan of the Sales Marketing division.

When the supply chain part, in this case, is the PPIC already get sales forecast data from Marketing, then the supply chain part will process the data so that later in the know-how many items to order, when Must arrive at the factory and so on.

Because of the ordering of goods base on Marketing sales forecast, the production will perform the production process of goods that are requested by Marketing with material materials that have been in the message by the supply chain. Ideally if not miss then the number of goods in the message by the supply chain will also be exhausted later in use by the production process.

The question is then if the booking is based on Sales Marketing forecast why in the warehouse can still happen overstock?

Causes of overstock as follow:
  • Revisions planning sales from Marketing, while the supply chain has already been made to order goods and goods have come in the warehouse.
  • Error data stock Warehouse, this sometimes occurs if the condition of storage or storage in the warehouse is chaotic and not neat so that there is a slip of goods that are not calculated.
  • The minimum order quantity of a supplier, sometimes some suppliers set a minimum quantity order policy on their goods. It is enough to burden the buyer because it will be a load later on. However, the goods must remain in the purchase because otherwise the production of goods in need by Marketing can not be done.
C. WHAT IS THE EFFECT OF OVERSTOCK ON COMPANY BALANCE?

The influence caused by the overstock of material in the Warehouse is very much for corporate finance. Some of them include:
  • Cash flow is unhealthy because the company's money is widely stored in warehouses in the form of raw materials.
  • The company must issue an extra fee to provide the storage space. With the condition of a limited space warehouse then space or storage space is expensive because it should be a place in use to store the over-goods that can be used to store other items.
  • The risk of damage to the over-goods is high because the longer the goods are unused then the quality of goods will also decline. It is certainly a disadvantage because later companies have to buy the goods because of the decline of the quality resulted in the goods can not be used anymore.
D. HOW TO PREVENT OVER STOCK

To overcome this overstock problem then you as a warehouse head should work hard and consistently in running the operational activities of the warehouse. Because the cause of overstock is not derived from the warehouse only but also the other division, then you should have a tip so that from the side of the warehouse can reduce the potential occurrence of the overstock.

Some of the ways or tips you can do as below:
  • Neat and orderly placement of storage positions.
  • The identity of the goods must be clear and readable and can be understood by everyone.
  • Make sure the stock card is always in update condition.
  • If you have used the MRP system for example SAP, Axapta, Accurate and so on then be sure to do update the transaction on the system at any time.
  • Do a random stock of several items every day.
  • Do the stock count result every month once.
  • Update the usage and consumption of BOM or bill of material. Make sure if there is a revision immediately adjusted system according to the applicable rules.
  • Participate in the purchase plan of goods by PPIC and Purchasing.
  • If you are proficient enough in the Ms. Excel program try to create a program yourself that can help your tasks.
  • And so on.
That's the article on how to overcome and prevent overstock in the warehouse, hopefully, useful and will give an added value for you.

Thank you for visiting and taking the time to read the articles on my blog.

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