Optimising Shared-Stock Allocation: A Guide to Balanced Inventory Management

Shared-stock constraints occur when multiple products or SKUs depend on the same raw materials, components, or production resources. Mismanagement of these shared resources can lead to bottlenecks, inefficiencies, and missed revenue opportunities. Systematic analysis and optimisation of shared-stock allocation helps businesses enhance profitability, control costs, and maintain customer satisfaction.

At Brand Content Strategy, our workflows, such as the Startup Finance Workflow, empower businesses to integrate these analyses into their operations, ensuring data-driven decisions across inventory, pricing, and financial planning.

Why Shared-Stock Constraints Demand Attention

1. Optimised Allocation:
Focusing too heavily on one SKU at the expense of others can result in stockouts, causing lost sales and unfulfilled demand.

2. Cost Control:
Efficient shared-stock management minimises procurement costs and prevents overstocking low-priority SKUs.

3. Customer Satisfaction:
Timely availability of high-demand products reinforces brand loyalty and trust and is critical for long-term growth.

Steps to Analyse Shared-Stock Constraints

Step 1: Identify Shared Resources

Begin by mapping all raw materials, components, or production resources shared across SKUs.

• Categorise Dependencies:

  • Primary Resources: Critical for production (e.g., fabric used for multiple clothing lines).

  • Secondary Resources: Non-essential but value-adding (e.g., branded packaging).

Example:
A beverage company uses the same bottle for sparkling water and iced tea, creating a primary dependency on bottle supply.

Step 2: Calculate Resource Demand by SKU

Use this formula to project resource needs:

Resource Demand (Units) = Forecasted Sales (Units per SKU) × Units of Resource per SKU

This helps you calculate the resource demand per SKU.

Step 3: Compare Resource Supply vs Demand

Assess available stock and incoming replenishments to identify surpluses or deficits:

Surplus/Deficit = Available Stock − Total Resource Demand

Example:

• Available Stock: 2,000 units

• Total Resource Demand: 2,100 units

• Deficit: 100 units

Step 4: Prioritise Allocation

When resources are insufficient, prioritise based on:

• Profitability: Direct resources to SKUs with higher contribution margins.

• Sales Velocity: Support high-demand, fast-moving products.

• Strategic Value: Focus on SKUs vital for brand positioning or customer acquisition.

For instance, in the form of a table, each SKU can be ranked on the basis of its contribution margin and strategic importance in the flow of things.

Step 5: Explore Mitigation Strategies

If constraints persist, adopt these solutions:

• Increase Supply:

  • Negotiate faster deliveries or alternative suppliers.

  • Substitute materials where possible.

• Reduce Demand:

  • Limit promotions on low-margin SKUs.

  • Shift marketing focus to unconstrained products.

• Optimise Production:

  • Batch similar SKUs together to reduce changeover waste.

  • Employ lean manufacturing techniques.

Common Pitfalls and Solutions

1. Overlooking SKU Dependencies

Risk: Stockouts in key products due to shared resource shortages.
Solution: Maintain a detailed resource map linking SKUs to shared components.

2. Neglecting Seasonal Variations

Risk: Resource misallocation during peak demand periods.
Solution: Integrate seasonality into forecasting to anticipate fluctuations.

3. Ignoring Profit Margins

Risk: Allocating resources to low-margin SKUs erodes profitability.
Solution: Base decisions on contribution margins and overall strategic importance.

Pro Tip for Founders

Integrate shared-stock constraints into a broader inventory planning framework using real-time tracking tools. Dynamic tools that adjust to sales forecasts or supply level changes are invaluable. Focusing on SKUs that maximise profitability and customer satisfaction can help businesses create a balanced and agile inventory strategy.

Brand Content Strategy’s workflows, like the Startup Finance Workflow, incorporate these principles, helping businesses navigate complex challenges like shared-stock management with clarity and precision.