Within this article, we will talk concretely about a fundamental type of stock in our warehouse: functional stock. We will get to know the various types to recognize them and know how to better manage the warehouse.

One of the most important aspects in managing a workshop is certainly that of managing warehouse stocks in the best possible way. But what is meant by the word "stock"?

With "stock" we mean that quantity of material, which we can find inside the warehouse.

Inside the warehouse of a workshop, there may be consumables or spare parts. Obviously, correct management of warehouse stocks is necessary, in order to guarantee production continuity and use of materials.

How important are inventories? According to some studies, they can also affect 20% of the value of the warehouse and 2 or 3% of the annual turnover.

Before delving into the world of functional stocks, let's make a small comment on the strategic and managerial importance of stocks. Having a good warehouse storage allows us to guarantee a smooth production and working chain. If a particular customer brings us his car to carry out repairs, if we have the parts in stock, we can intervene immediately.

A further important aspect to underline is the workshop's ability to deal with certain changes in product demand. If we don't have some spare parts in stock for a car that has sold a lot lately, our workshop can encounter situations of work suffering. Therefore, having the main and potentially most requested pieces on the market is a really important necessity for every workshop.

We now come to the heart of this article, namely the functional stocks. The objective of this article is to create a complete picture of all types of functional inventories, to create an overall improvement in warehouse management.

We can define "functional stocks", those stocks that guarantee the production activity and productivity of a workshop. They therefore contribute directly to increasing the level of customer satisfaction.

In fact, deliveries are made quickly and on time. In fact, it may happen that a particular workshop can delay a certain delivery, precisely because it does not have that particular product available. The situation in question is absolutely to be avoided in order not to interrupt the production flow and reduce customer satisfaction.

On the other hand, you don't even need to fill the warehouse with goods too much, to be sure of filling any requests.

It is therefore necessary to find the right level of stocks.

Returning to the concept of functional stocks, we can divide them into 7 categories.

The first type is the safety stock, i.e. the minimum level of stock that must be present in the warehouse. It is used to deal with any unforeseen events, such as order peaks, or delays by suppliers. If we have an adequate safety stock, it is no problem to find ourselves unprepared for any supply disruptions from suppliers.

The alert stock, on the other hand, is the threshold that indicates the time to issue an order. The goal is, clearly, not to run out of material. What to do at that moment? We have to contact the supplier!

The third type of stock is the seasonal one, which is accumulated in periods when demand is low enough ... while it is consumed when demand increases. We can think, for example, of snow chains, which we can sell to customers in the winter. During the summer period, it may happen that we have more in stock due to the replenishment by suppliers.

Instead, it is defined as inactive stock, that type of stock that brings together all those obsolete products that can no longer be sold. We are talking, for example, of spare parts for cars that are no longer in production and are hardly brought to our workshop. Technically, these are materials that take up useless space in the warehouse, and represent a waste in terms of money and space.

The stock in transit, on the other hand, is the stock that enters along the path of the supply chain. In simple terms, they are all those products whose delivery we are waiting for from the supplier.

Finally, speculative stock is defined as that stock which is used to exploit (in one's favour) any fluctuations in the price of a given product. In the event that we bought, for example, a light bulb for $1 and subsequently the value of the light bulb increased, this is a classic example of a speculative stock. The accumulation of speculative inventories allows us to increase the value of that specific asset, thanks to the resale at a higher price. This increases the other workshop's profit.

Building speculative stocks is very important and must be done in times when product prices are low enough.

As the last type of stock we have the one defined as "cycle". It provides for the accumulation of a quantity of goods greater than the real need. The target? Obtain advantageous economic conditions, thanks to quantity discounts. In simpler words, the supplier gave us significant discounts on the products…due to the large number of products purchased.

So here are the different types of functional stocks. Their role within a workshop warehouse is very important indeed. Knowing the different types of functional stocks allows us to have a clearer view of the warehouse.

Speculative stock accumulation is a strategic goal for every workshop! A sort of extra economic profit would be created, perfect for being reused in other machinery in the workshop.

Curious to know more tips on optimal management of the workshop and warehouse? Subscribe to YouDriver! More articles coming soon…like “What are the Inventory Management Costs?”

Sign up here


credit photo freepik