Inventory management

Inventory management is a set of rules and operations to keep the right amount of products in stock to minimize shortages and overstocks given lead times and demand levels.

How inventory management works: key elements

The inventory management system consists of a collection of metrics, replenishment rules and receiving/fulfillment processes. Main elements:

• Demand forecast — an estimate of expected sales volume by day/week/month.
• Lead time — the time from placing an order with a supplier to goods arriving at the warehouse.
• Safety stock — a buffer for demand variability or supply delays.
• Reorder point — the stock level at which a new order should be placed.
• Replenishment policies — continuous (reorder point) or periodic review and replenishment.

Basic formulas sellers use:

• Reorder point = average demand during lead time + safety stock.
• Simple safety stock formula when demand standard deviation is known: safety stock = z × σ × sqrt(lead time), where z is the service factor (e.g. 1.65 for 95%).
• EOQ (economic order quantity): EOQ = sqrt((2 × D × S) / H), where D is annual demand, S is ordering cost, H is annual holding cost per unit.

Why sellers on Kaspi.kz need it

For a seller on Kaspi.kz, inventory management directly affects revenue and product card visibility:

• Reduced lost sales. In practice, running out for even 3–5 days a month can cut a fast-moving product card's monthly revenue by 10–20% (accessories, consumables).
• Working capital optimization. Storage costs in Kazakhstan for a small warehouse are about 1–2% of product value per month; excess stock ties up cash.
• Control of returns and spoilage. For items with limited shelf life (supplements, cosmetics), wrong FIFO cycles increase write-offs and returns.
• Impact on Kaspi logistics. When operating in FBS mode the seller is responsible for delivery from their warehouse; frequent out-of-stock events reduce logistics efficiency and harm customer experience.
• Ranking and visibility. Kaspi takes availability stability into account when ranking: product cards that are consistently "in stock" receive more impressions and conversions.

Examples from sellers in Kazakhstan

Below are real cases and calculations that sellers on Kaspi.kz often face.

• Case 1. Phone cases. The seller moves 2,000 cases per month (~67 per day). Lead time from the local supplier and warehouse replenishment is 14 days. Average demand during lead time = 67 × 14 ≈ 938 units. If demand standard deviation is 15 units/day, σ_lead = 15 × sqrt(14) ≈ 56.1. For 95% service (z≈1.65), safety stock ≈ 1.65 × 56.1 ≈ 93 units. Reorder point ≈ 938 + 93 = 1,031 units. Using these figures, the seller schedules replenishment when stock falls near 1,030 units to avoid stockouts while keeping inventory reasonable.
• Case 2. Cosmetics with shelf life. A cosmetics seller sells 600 units/month (≈20/day). Lead time including supplier delivery and internal processing is 21 days. FIFO rotation and smaller batch sizes are essential to avoid expiry. Safety stock should be balanced with shelf life — in many cases it's better to increase order frequency and reduce batch size than to hold large reserves.
• Case 3. Imports from China. For centralized imports with lead times of 45–90 days, include production, shipping, customs and internal transit in lead time. Long lead times require higher safety stock, but also signal the need for more detailed forecasting and staged orders. Consider holding buffer stock in Kazakhstan for fast SKUs and using larger, less frequent orders for slow-moving items.

Practical tips and implementation checklist

• Segmentation (ABC analysis): focus tighter controls and higher service levels on A-items (top revenue contributors).
• Automate data collection: sync sales, stock and lead time data from Kaspi and your warehouse to avoid manual errors.
• Set service level targets per category and SKU, not one-size-fits-all.
• Use rolling forecasts and update parameters monthly or more often for volatile SKUs.
• Run occasional stock audits and reconcile physical and system balances.
• Plan for promotions: increase safety stock before planned marketing events or price campaigns on Kaspi.

Mistakes to avoid

• Ignoring seasonality and promotions when forecasting.
• Rarely updating lead time and safety stock values.
• Manual stock management without integration with Kaspi or logistics partners.
• Applying the same policy to all SKUs regardless of turnover.
• Not monitoring fast-moving categories separately (consumables, accessories).

Tools and the role of AWW

AWW helps automate inventory processes for Kaspi sellers: it can import sales and stock data, run ABC analysis, calculate safety stock and reorder points, and trigger replenishment actions. For FBS sellers AWW can monitor fulfillment performance and flag frequent Out of stock items. Integration reduces manual updates, improves lead time estimates and supports better Buy Box and product card stability on Kaspi.