Target Stock Level: The Daily Definition

 In Best Practices, Inventory Management, The Daily Definition

What is target stock level?

Target Stock Level

Target stock level is the amount of product you want on hand at any given moment. Also abbreviated as TSL, it’s that sweet spot in your inventory levels that means your business is humming along nicely. You have enough inventory to meet customer demand, but you are also not losing money by having too much inventory taking up valuable space.

An example:

In general, target stock levels are calculated using the following formula:

Initial stocking level (ISL) + Safety Stock = Target Stocking Level (TSL)

There’s a lot that goes into determining TSL, though. Exact calculations may vary depending on your company’s needs. Intimate knowledge of your inventory is key to understanding TSLs.

Sales pipeline visibility is also important when making these calculations. If you don’t know what the future demand for your inventory is, how do you know if you’re prepared? Make sure that you are utilizing an ERP solution that gives you the data you need to properly determine your target stocking levels.

Our two cents:

We’ve already touched on inventory and pipeline visibility. But no discussion about target stock levels is complete without talking about stock counts and reorder points. So, let’s dive in.

Stock counts are your friend when fighting to maintain control of your inventory. Barcoded stock counts ensure accurate warehouse data, which in turn instills confidence in your TSL data. And if you don’t have confidence in your data, you’ll find yourself with many more problems before you know it.

Reorder points go hand-in-hand with stock counts. It’s not enough to know how much inventory you have — you need to know when to order more. Determining your business’ reorder points is critical to the success of your product-driven business.

A data-driven warehouse is a healthy warehouse. So roll up your sleeves, break out the calculator, and figure out your target stock levels. You’ll be glad you did.

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