For manufacturing companies a crucial element of running a
successful business is the manner in which they control their stock holdings.
Carrying stock ties up money. This money is either borrowed and
carries an interest charge, or represents funds that could otherwise be better
used in servicing other elements of the business.
There are additional costs in holding stocks such as storage and
the risk of getting spoiled, breaking, being stolen, or simply going out of
style.
Wherever possible companies need to reduce stock holdings and
there are various means by which to achieve this aim:
Liquidate slow-moving or obsolete stocks.
Introduce more efficient production techniques to reduce stock
holdings.
Rationalise the product range weeding out the under performers and
thereby reduce stock carried.
Negotiate sale or return with suppliers in order to avoid being
stuck with unwanted product.
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