The basic activities performed in the warehouse include the valuation of goods, which is closely related to the stage of inventory and the entire management of products in the warehouse. Therefore, warehouse management also means constant control over the status of incoming, stored and outgoing goods, but also their monetary value, necessary to keep the company's balance sheets.
Each product in a warehouse has an economic value, i.e. a price that must be determined on the basis of many factors, including the period of storage in the warehouse, its quality and, of course, value in itself.
Valuation of goods in stock
The price specified for goods in stock does not correspond to the selling price of the products to the final consumer. The prices defined at this stage are addressed to retailers and are determined, as stated above, on the basis of certain criteria. Usually, when valuing goods we start with ABC analysis. This is a statistical analysis based on the Pareto principle, which allows products to be divided into three categories according to their importance and relevance, both in quantitative and economic terms:
- The items in category A are the main items that record the highest value of company turnover. In practice, the items most often sold are those with the highest level of flow in stock.
- The category B items, on the other hand, are those that are of secondary importance and have less impact on the turnover value.
- At the end of the day, the articles in category C are less frequently purchased during the year and therefore their number in stock is lower than that of other products with a higher turnover rate.
Therefore, we first analyse the movements of goods in the warehouse, identifying the products that have a greater impact on the company's turnover and making sure that we ensure their permanent presence in the warehouse. This also allows us to identify products belonging to the other two categories. However, this process is not a permanent rule that should be invoked. In order to establish prices and identify product categories, it is necessary to update the stock periodically and make sure that stocks are prioritised accordingly.
Valuation of goods based on cost
At the stage of valuation of goods we also take into account the costs that will be incurred for each category of goods. With regard to the warehouse, the costs are usually divided into:
- Order costs, concerning the costs of purchase of products and costs incurred for their delivery, i.e. transport and administrative and bureaucratic procedures necessary to deliver goods to the warehouse;
- Maintenance costs, relating to the actual day-to-day management of the warehouse and stocks, i.e. personnel, plant, utilities, etc;
- The costs of the deficit, related to any stock interruption due to damaged items, cancelled orders and requests for discounts.
Therefore, the stage of valuation of goods in stock is not at all simple and requires a careful analysis of various factors. Finally, the need to avoid keeping certain items in stock for too long. In the case of products that have been in stock for a long time, as confirmed by periodic inventories, we resort to promotional campaigns or discounts that may facilitate their sale. In this way, we avoid socking up and attempt to make maximum use of unsold items that would otherwise have a negative economic impact on the company.