In today's article, we will talk about an optimized warehouse management methodology. We will try to understand if this strategy, used by many companies, can also be used by a workshop.
The economic literature has many methods of analysis and theoretical management of a warehouse. The latter is a fundamental part of every company as it contemplates the management of goods that have already been produced or purchased.
Having a warehouse with a high rotation is an indication of good health on the part of the company. The motivation is really very simple, and is linked to the fact that the more goods sold quickly, the more the company invoices and therefore revenues increase.
However, when having to manage a warehouse concretely and in detail, some questions may arise spontaneously.
In fact, if an order arrives from one of our customers, who wants to use a specific product in his car, we have to choose in practice which exact product, present in the warehouse, to deliver.
In other words, we have to choose which of the X "identical" products that are present in the warehouse, we have to invoice.
One of the simplest methodologies, and also more intuitive, is the FIFO methodology. This acronym comes from the English phrase “first in first out”. It can be used for products of any nature, even virtual ones, but obviously in the case of a workshop, we are talking about absolutely tangible products.
In a very simple way, the first product that enters the warehouse must leave first.
The FIFO method, in fact, represents a warehousing methodology where the first object that has been loaded onto the shelves is the first to be billed as sold.
To understand it better, we can make a visual example where a tube, with one end allowing objects to enter and the other end allowing objects to exit. The exit order is the same as the entry order.
The FIFO method is opposed to the LIFO method, or "Last in first out". Translated into Italian we can say that the last to arrive is the first to leave.
The FIFO method is one of the possible methods for stock valorisation and is probably the most suitable within a workshop.
It consists in enhancing the warehouse discharges, starting from the first cases that have been carried out. In this way, we can go to determine as soon as possible a fair valuation of each single product loaded in the warehouse.
Let's think, for example, of light bulbs or spare parts or even lubricants. If we have purchased 100 4-litre packs of oil to resell, it is clearly advisable to carry out a first-hand sale of the older cans. All this, for the simple reason of keeping the products as up-to-date as possible.
This method, within all companies, is the most used for a rapid turnover of goods. The risk is that some subject-objects become unsellable, due to too much time spent.
Even simply standing on the shelves can lead to deterioration of the object. In this way, it is possible to create an optimization of the warehouse and have a positive feedback from the customer.
We would never like to have a customer who is dissatisfied with receiving an "old" product they have just purchased. The technical obsolescence of the products is not a punctual issue within the workshops, but damaged packaging or faded colors can create perplexity on the part of customers (clearly we are talking about reusable products within a few months).
Physical products very rarely become obsolescent, but all in all the packaging does its part.
If we wanted to compare the FIFO methodology with the LIFO methodology, we would have to analyze some aspects. The LIFO methodology is indicated for non-perishable goods, which do not expire or do not lose value over time.
We can speak, for example, of bricks, or of sand or coal. In this way, clearly, there is no question of which sand to use. This example is very simple and allows you to understand how FIFO is the most suitable methodology.
We must also consider the costs of moving the goods, which can be reduced to 0, when we use the FIFO method.
Looking at the economic aspect, the FIFO methodology is also particularly suitable for generating profits. This aspect is connected to the particular current situation of car and component prices.
With high inflation, the products that have been in stock the longest must be the first to go out and sell.
For all these reasons, we can say with absolute serenity that the FIFO methodology is the most suitable for warehouse management within a workshop.
Clearly there is a very broad discussion on how to best manage a warehouse. This last component is just one of the dozens of particularities that the automotive entrepreneur must consider.
When you set up a workshop, you are never certain of the level of profits and the costs that will be incurred. As we have seen in previous articles, the diversity of the Automotive world shows that there are different types of costs.
In fact, we have fixed costs, but also flexible ones, in addition to direct and indirect costs. In this article, however, we wanted to focus on a very important aspect of accounting and inventory rotation.
We hope we have shed some light and given some interesting ideas for all those who ask themselves on a daily basis how to optimize the warehouse and how to achieve an ever-increasing profit situation within their own workshop.
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