Stock Level: Definition, Functions, Calculation Methods, and Optimization Tips

In warehouse operations, accurately knowing the stock level is essential for companies. By understanding the available stock, companies can more easily fulfill customer demand and identify products with high demand.

One way for companies to measure stock level is by conducting regular stock opname (inventory counting). In addition, technology plays a major role in warehouse management to ensure more accurate records, allowing companies to know the stock level precisely.

Definition of Stock Level

Stock Level is the amount of inventory available in the warehouse at a given time. Its main purpose is to ensure that stock is sufficiently available to meet customer demand and company operations efficiently, without causing problems such as overstock or stock shortages.

Stock Level is often used in inventory planning, warehouse management, and supply chain. By knowing the stock level, companies can determine the right time to reorder and minimize the occurrence of dead stock.

Functions of Stock Level in Warehouse Management

Accurately knowing stock levels has important functions in the warehouse management process, including:

1. Preventing Stock Shortages

Stock Level helps prevent failure in fulfilling orders due to stock shortages. This allows companies to plan and replenish inventory in the right quantities.

2. Maintaining Warehouse Operational Efficiency

Keeping an optimal stock level allows warehouse operations to run smoothly without delays. This will increase stock flow efficiency in the warehouse and ensure on-time deliveries.

3. Reducing Operational Costs

By optimizing stock levels, companies can minimize expenses related to operational costs caused by excess stock. This enables companies to allocate budgets for business development or improving customer service.

4. Optimizing Inventory Planning

Stock Level plays a key role in helping the purchasing team determine the right time to reorder, ensuring inventory remains within the ideal range.

How to Calculate Stock Level

There are several ways for companies to calculate stock levels available in the warehouse. Below are 4 formulas to calculate stock level:

1. Minimum Stock Level

The Minimum Stock Level is the lowest amount of stock that must be available before the company replenishes inventory. Formula:

Minimum Stock Level = Safety Stock

From this formula, we can interpret that the minimum stock a company must hold is the safety stock, or backup stock kept to handle unexpected demand or supply issues.

2. Maximum Stock Level

The Maximum Stock Level is the highest limit of stock that should be stored in the warehouse. Formula:

Maximum Stock Level = Reorder Level + EOQ – (Average Demand × Lead Time)

This formula involves 4 key factors: Reorder Level, EOQ, Average Demand, and Lead Time. Reorder Level is the lowest stock level in the warehouse that signals the need to reorder. EOQ (Economic Order Quantity) is the most economical order quantity to place at once, while Lead Time is the waiting period from the time of order until the stock arrives.

3. Reorder Level

The Reorder Level is the specific stock point at which the company must reorder goods. Formula:

Reorder Level = Average Demand × Lead Time + Safety Stock

To accurately determine the reorder level, companies need to know the average customer demand, lead time, and available safety stock in the warehouse.

4. Average Stock Level

The Average Stock Level is the average inventory held during a specific period. Formula:

Average Stock Level = (Minimum Stock Level + Maximum Stock Level) / 2

Tips for Optimizing Stock Levels with RFID and Stock Opname Software

1. Using RFID for Real-time Tracking

By using RFID (Radio Frequency Identification) technology, every item stored in the warehouse can be tracked in real time. RFID helps companies quickly and accurately monitor the location, quantity, and status of stock, minimizing risks caused by human error in tracking.

2. Implementing Stock Opname Software

Stock Opname Software enables companies to automate inventory management processes. This system can analyze data collected by RFID, making it easier to identify which stock items are nearing reorder levels and which need optimization. In addition, Stock Opname Software can integrate with other business systems such as supply chain management software or ERP.

3. Accurate Demand Forecasting

Data collected by RFID and stock opname software allows companies to perform more accurate demand analysis. This helps companies plan restocking according to needs while avoiding excess inventory.

4. Maximizing Warehouse Storage Space

With RFID and stock opname software, companies can maximize storage space and warehouse layout. Stock placement can be arranged based on demand levels, stock movement, and priority. This accelerates picking processes and improves warehouse efficiency.

Warehouses that adopt technology such as stock opname software gain several advantages. These include real-time data integration and collection, stock level notifications for production needs, easier and more accurate reporting, and integration with other software or hardware to enhance overall warehouse operations.

In addition to warehouse management systems, implementing RFID (Radio Frequency Identification) such as Prieds RFID is highly beneficial for improving stock tracking accuracy and control. RFID devices enable automatic item identification without manual counting. With RFID, each item has a unique tag readable by an RFID scanner, making it easier for companies to know stock levels accurately and reduce errors.

You can learn more about how to optimize stock levels using RFID and Stock Opname Software by consulting with an expert team. Get software equipped with complete features, top security, and user-friendly functionality tailored to your company’s needs with Prieds.