The Ultimate Guide for Forecasting Stock Volume Control
As you’d expect, our stocktakers know a thing or two about stock. Stock volume control in particular is something they advise our clients on whenever they visit sites. It’s a key part of ensuring you make as much profit out of your stock as possible.
Now, more than ever, it’s so important to make every penny count. So we thought, why not share some great tips to help you manage your stockholding better by ordering the right levels and volumes of stock?
Now, before we continue, let’s take a small pause, because we can hear you thinking “forecasting stock volume today is not what it used to be”. Why? Well, it’s quite obvious… COVID-19. The circumstances under which pubs, restaurants, hotels and other hospitality businesses have to work today is so entirely different to previous years – it almost can’t be compared.
Despite that there are still some key principles that you can follow when forecasting stock volume and that’s exactly what we’ll talk about in this article. We’ll give a couple of pointers on how to avoid pitfalls in stock control during COVID-19 too. But for additional tips from our stocktaking experts about forecasting stock volumes for the months ahead we highly recommend you read our other article, which focusses much more on short-term stock control for the months ahead – you can read it here!
So, let’s begin.
When predicting and ordering the right levels of stock volume, what factors should one always consider?
The level of stock held should primarily be based on the level of expected business. There are, however, a number of secondary considerations. These may include a product’s order and delivery dates, its shelf life, security of the stock held and, in many businesses, the physical limitations of stock holding.
Everything you need to know and consider to forecast stock volume better
- Expected business
Many sites will have a par stock. This is the minimal level at which the stock is held to satisfy day to day business. It’s one of your most important factors to consider when looking at forecasting stock volume. Larger orders will then be placed for expected peaks to supplement your base level of stock.
This par stock on hand level is often guided by the parent company and is assessed as a number of days stock held. That is to say under typical trading how long the stock would last before the cellar, fridges and stores run dry. A full stock report will show this as an overall figure and can often be presented per product based on previous sales. Having this data is therefore key to controlling your stock volume appropriately.
For pub operators there is a huge difference, of course, depending on the ownership or lease of the pub. Keeping a minimal stock level is much easier if the operator is able to make ad hoc, short notice additional purchases to meet unexpected demand. For the owner operated freehold, this may be a quick trip to the supermarket or the cash and carry. This will cover a busy session whilst at the same time maintain a minimal Par Stock.
Tied pubs or those with tight restrictions on nominated suppliers may be unable to be so flexible and will need to keep higher stock levels to allow for these often unexpected changes to demand. In current circumstances, in order to maintain the lowest Par Stock, pub companies may have to loosen the restrictions to these ad hoc purchases. Regular stock take visits will ensure that these small purchases are reported correctly and financial audit checks will ensure that all petty cash payments are correctly recorded.
- Order and delivery dates
The day of order and delivery from a main or draught supplier will affect the level of stock held. Ideally an order placed early in the working week, to be delivered before the weekend, means that a manager only has to base his order on that one weekend to come. They can also use the sales and stock leftover from the last weekend of trading to help ascertain their required stock levels and to plan their next order accordingly.
If forced to order on a Friday, for delivery on Monday, the manager must estimate consumption in the weekend to come and similarly do the same thing again the weekend after that, in order to ensure stock levels are sufficient. This often leads to the manager over ordering and holding more stock than required to ensure continuation of service.
Two deliveries a week, conversely allows the manager to maintain a minimal stock with only a few days predictions required.
Food delivery ordering tends to be more regular and often daily deliveries of fresh products will allow minimal stocks to be held. Weekly frozen supplies, however, will often face the same issues as those you face to keep a cellar correctly stocked.
- Product shelf life
BBE dates and ‘use by’ dates must be considered for both food and drink. A stock holding should never be so high that stock is not used before products go past their shelf life dates. It takes careful planning and monitoring.
Professional stock management will ensure that both food and liquor stock is correctly rotated, whilst at the same time making sure that the volume of trade is sufficient to use the stock. Poor rotation can lead to a stock item passing its product shelf life date, because it was hidden by more recent stock. A professional stocktaker or compliance auditor will always assist with recommendations for good stock control whilst on site.
It should be noted, that as we are encouraged to drink more outside due to COVID-19, that there may be conditions on a premises licence that requires service of PET bottled beers and ciders outside. These have a far shorter shelf life dates than glass bottles due to the viability of the seal. Be careful to order in smaller quantities to avoid PET items falling past date.
Be more wary of bulk discounts too. The saving promised will be significantly less than the loss of the product to waste if not used before date. In these days of uncertain trade levels keeping stock on hold to a minimum must take priority.
- Stock security and physical limitations
When ordering stock, the security of the stock held must be considered. Often a spirit store will have limited capacity and if ordering beyond this, consideration must be given to excess stock security.
Be aware that in these COVID-19 days, more outside spaces and courtyards are in use for seating. External stores that may not have been seen by customers before now need to remain secure during trading. Think about where and how excess stock is going to be stored.
Smaller stores and old restricted cellars do actually force a site to hold low stocks, this is not always a bad thing. Often poor stock controls are seen in establishments with vast stores and cellars where historically pallet rates were taken advantage of. In these uncertain times tight controls on ordering must be maintained.
- Known Fluctuations in Trade
Hospitality operators have traditionally been excellent at predicting trade and forecasting demand. Of course, we have all been caught out, but a good operator will be aware of local events, sporting fixtures, carnivals or family events for regulars.
Most operators with outdoor space will have at least 3 weather apps on their phone and will base ordering on the capacity and likely use of the outside space. Pubs with long term managers will know seasonal fluctuations, be aware of local campsites and holiday trends and be conscious of Christmas party levels by late autumn in order to plan stock and staff levels.
Good operators have excelled at forecasting, but so much is based on past knowledge. Lockdown is a whole new ball game and we have to rely on each other to read the events and carefully guess the virus’ next move.
- A final tip for new managers
Poor stock control and poorly managed levels often stem from a manager’s inexperience. If new to a site with limited local knowledge, ordering may be based on past experience at a different location. It takes time for a manager to become embedded in a business and for the first year at least, careful controls must be in place to ensure over-ordered stock is used before passing date. Whilst seeking advice in those early months be careful to understand that others’ perceptions of ‘busy’ may not match yours. Ordering based on the fact that a team captain tells you the pub will be rammed, may in actual fact end up as half a dozen mates and a cellar full of beer.
We hope you found this article helpful. Just remember, a good stocktaker will help advise you on proper stock volume control. If you are struggling to get this right, get in touch with us today by filling in the form on this page.