What is Procure-to-stock in E-commerce?
Procure-to-stock involves purchasing goods from suppliers and stocking them in a warehouse in anticipation of customer orders. It is used in industries such as retail, grocery, and wholesale, where customers make regular, predictable purchases.
The process is designed to reduce costs associated with carrying inventory, such as warehousing and storage fees, and reduce the time it takes for customers to receive their orders.
Significance of Procure-to-stock in E-commerce
Procure-to-stock enables businesses to stock products in order to meet customer needs and maintain inventory levels. The benefits include-
1. Procure-to-stock systems enable businesses to reduce inventory costs by cutting down on the number of items stored and avoiding overstocking.
2. With a procure-to-stock system, businesses can order in smaller batches and pay for the items as they are used. This helps to improve cash flow as businesses don’t have to pay for the entire inventory upfront.
3. Procure-to-stock systems provide greater visibility into the supply chain. This can help businesses to better manage inventory levels and anticipate demand.
4. By ordering in smaller batches, businesses can reduce the risk of overstocking and having to dispose of excess inventory, increasing profits.
Prerequisites to Calculate Procure-to-stock and How It Works
To calculate procure-to-stock, businesses must have accurate records of the inventory they hold, the amount of inventory they need to meet customer demand, and the cost of the inventory. Additionally, businesses must have an understanding of the cost of inventory holding and the cost of procuring new inventory.
Use Case With Procure-to-stock
Suppose a company is selling green tea to its customers. Now, to meet the demand, they must have enough inventory to sell and earn. Using the procure-to-stock process, they can keep the required products in the stock house to satisfy customer needs and earn profits.