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What Is Floor Stock And How It Works?

Ngoc Lee
What Is Floor Stock And How It Works?
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Floor stock was created as a method of increasing the efficiency of commodity control. To learn about it, you need to know the floor stock meaning and related issues that will be discussed in the article below. Many businesses are currently facing the problem of having to release small quantities of low-value parts into tools for the production process. 

This both takes more time to check the goods and also partly loses the business a large amount of money if considering the value of those parts. To solve this problem, an approach that is floor stock was introduced.

What is floor stock?

Floor stock definition
Floor stock definition

Floor stock, also known as stock, is a term used to refer to items used in replenishing inventory. Floor stock is stored in a designated area at the factory so employees can transport or pick up items without the use of solicitation. 

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The usage of this term in manufacturing and retail will be different, but basically, it still shares the same definition of stock on the exchange that is for users who have the right to use them. Floor inventory is like other commodity concepts, it also needs to have steps to track usage and revenue so that businesses can have better strategies to store enough inventory.

Floor stock in retail

In retail, the floor stock system refers to the inventory of goods that are stored in the warehouse until employees need products to replace those on the shelves in the sales area. When customers buy items on the shelves, the staff will use the items in the warehouse on the shelves to place them in the empty slots. 

Usually, this will be noted for easier tracking. Besides, you also determine the number of goods to buy from suppliers to maintain the right amount of stock.

Floor stock in manufacturing

The use of floor inventory has also changed in manufacturing plants. At this point, an area in the plant will be designated as a stocking area that can be used by different departments without the need to report or submit to a formal request. Small products such as copy paper, staplers, pencils and pre-printed corporate forms will often be applied in this way. The manager will check the remaining quantity in stock to calculate the additional order based on the current demand for each item. This simplifies the work process and saves staff time. 

Regardless of the economic model applied, the main purpose of floor stock is to ensure that the number of items will meet the needs of users. Businesses will also rely on these metrics to assess customer demand for each product category, often setting a minimum quantity to maintain inventory in the back room. 

When the minimum quantity is reached, the business will order from the supplier to replenish the item in stock before it runs out of stock. This is an effective strategy when it comes to ensuring that the amount of replenishment will always be sufficient and at a minimum to make the most of the warehouse space.

How does the floor stock work?

With each economic model, floor stocks will have a chance to be more suitable. But in general, floor shares will behave like this: A number of goods will be moved from the warehouse to the warehouse floor. They will then be controlled as floor inventory items identified on the business' component profile. 

When the assembly is complete and products are pre-ordered for storage, they are added to the floor stock balance, reducing the amount maintained on the store floor. 

How does the floor stock work
How does the floor stock work

This solves the problem of less updated store balances because the store balance is now updated when materials are moved to the floor stock balance. Backflushing still retains its advantages. Another advantage is that the remaining raw materials in the export process will be stored in the system, thus limiting the loss of materials. 

The MRP system will treat the inventory count as the inventory balance, which is added to the stock balance before performing the netting calculation. The procurement will then use the required display products to transact because the release transaction has not yet taken place. This helps balance the accuracy in determining market supply and demand to maintain an efficient business process. 

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As mentioned above, floor shares are currently being used by many businesses as a solution to re-optimize their business operations. It will also have customization to suit each type of business. So if you want to apply floor stock to your company, make sure you understand it so that you can customize it to come up with the most suitable method.

Ngoc LeeNgoc Lee is an Content Creator Manager at EFEX. She wields her long-term expertise in Logistics and Supply Chain, harnessing her top-notch writing and research skills to bring incredibly valuable content. Whether you're a small startup or a well-established enterprise, Ngoc Lee is here to equip you with the essential knowledge of e-commerce, fulfillment, and all things business-related.