…. in transport and distribution. In this post I want to discuss about the cost in transport and distribution. It is the most important thing to control this cost, otherwise you can loose a lot of money.
The basic parameter that you must calculate is cost per km (mile) or cost per hour (for some machinery or vehicle). I am from Europe and i refer to cost per km because we use km here, but all this principle can be easy transfer to cost per mile.
When we discuss of stock we can have multiple approach: we can discuss about quantity of goods (how many products we have on stock), we can discuss about value (what is the value of the products that we keep on stock), but more often we discuss about day of stock.
Days of stock mean if i sell all the products that i have it in the stock in how many days all the stock is finish. This therms is relative to sales. But why we use this instead of quantity or value of the stock?
One of the reason is that this parameter days of stock it is constant for all the period of the year, and it is not affected by the sales fluctuation, it remains constant even if sales fluctuated in different period of the year or in different period of the month. For example 3 days of stock for product X is 3 days of stock in August(worst month in the year) and 3 days of stock in December (best month in the year). What is the difference between those 2 months? Even if i have 3 days of stock in August and in December the quantity will not be the same and we adjust the quantity of products X in those different months related to the sales. How we correlate this? It is a simple relation days of stock = (total quantity of product x) / (ADS) where ADS means average daily sales and means how many product X do we sale average per day. So, days of stock is constant but we adjust the quantities related to the daily sales.
Days of stock is calculated using input like: difference between payment term that we can obtain from customers and from suppliers, lead time between order and delivery, transport time, avoid out of stock etc. After we calculate the days of stock we can calculate the quantity of goods related to the average daily sales.
Another reason that days of stock is used is the ease of use. This parameter it is very important and a less value of this parameter can save a lot of the company money. One days of stock for every products that you have in portfolio will block important financial resources. On the other hand less days of stock increase the risk of out of stock and you will loose sales.
Always you must have a optimum value to not have out of stock or block a lot of money in stock.
If you have problem with stock we can help you to find the optimum.