What is Stocktake?: A Complete Guide

What is Stocktake?: A Complete Guide

Table of Contents
Table of Contents

What is your current inventory value? How much stock did you sell, and how much remains? Are your reports accurate?

Stocktake is the common answer to all these questions. All businesses must know the position at which their inventory stands. It allows them to keep track of the physical inventory and spot discrepancies if any.

This article walks us through the concept of stocktaking and the aspects related to it.

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What is Stocktaking?

Stocktaking is a process in which you manually check, count, and record all your inventory. It is a significant aspect of your inventory control. It has a direct relation with your production, purchasing, and sales. While the process may seem simple, the complications may vary from company to company.

Stocktaking is beneficial for all kinds of businesses. Yet, it is the most important for a manufacturer. They need to keep records of raw materials required to build the final goods. So, stocktaking helps them in raw material inventory management. Also, they avoid the problem of running out of stock which is detrimental to production.

Stocktaking: Manual Process of Counting Stock
Stocktaking: Manual Process of Counting Stock

Why are Stocktakes Important?

Product-based organizations must verify that their inventory levels are always optimum. They must do so as a part of the inventory control mechanism. It is even a legal obligation in several countries. Even if you are not obligated by law to do so, there are reasons to do so. Here are three important reasons why you should examine your items on a frequent basis.

Examine your Inventory Tracking Process

It is usually a terrible idea to rely solely on your system for precise stock levels. You can compare your stocktake data and uncover many discrepancies. You get know what you thought you had on hand, and what you actually have. You can also undertake measures to correct them before they become an issue.

Here are some of the problems you can avoid:

  • Stockouts: This happens when your stock of products has run out.
  • Overstocking: This happens when you have too many things or products on hand.
  • Obsolescence: Stock that has expired is your obsolete stock. These are the products that expired before you could sell them.

If you are not tracking your goods as anticipated, it could state inadequate inventory control. Thus, stocktaking gives you an opportunity to analyze problems sooner.

Meet Business Targets

It is must for a business to watch its KPIs, including the inventory turnover ratio. This lets them have accurate numbers representing their true financial status. When it comes to monitoring your company's success, you do not want to leave any stone unturned. With stocktaking, you will be better positioned to calculate crucial KPIs. Something like inventory turnover will help you reach precise figures.

Once you understand how your inventory control, you can fine-tune your methods. Also, planning around it to boost efficiency and profits becomes easy. Here are some factors you can consider for better inventory management:

  • Reduce the number of emergency supplies you keep on hand.
  • Change your pricing to ensure that all of your products sell rapidly.

Learn about Undetected Stock Issues

Deploying an automated system with cloud capabilities is a good option. It is something the companies usually resort to. Yet, it comes with its limitations. For example, if there is a transit problem, it may not be able to detect it. Such detection would be possible only with manual counting.

Problems like damaged products, poor control, or missed orders are common. These may remain undiscovered without manual checks. Stocktaking identifies these issues which your inventory management system can miss.

What is Cycle Counting?

Cycle counting is a stocktaking strategy. It entails inspecting a specific section of your inventory on specific days on a regular basis. Instead of performing a single annual count of the entire warehouse, you divide it into many smaller stocktakes.

This has various advantages over traditional stocktaking. The most important is that you avoid the interruption that occurs with a single annual take. The process involves counting on a smaller level. Thus, it does not disrupt the operations of the company. Many larger corporations choose this method against annual stocktaking. Primary reason being, they do not have to completely shut down their activities.

Some small businesses use a combination of cycle counting and traditional stocktaking. They do so at least until they are certain that abandoning old methods would not cause problems.

It can also aid in avoiding the huge variation that can occur when there is a wider interval between takes. Cycle counting is a complex operation that relies on inventory accuracy to function.

How to Stocktake?

For a systematic stocktaking process, companies must follow certain steps. Let’s see what they are:

Before Starting to Count

  1. You will need to close down for a day for this process. So, duly inform your customers and vendors about the date and time for counting. Also, schedule the arrangements to treat any discrepancies.
  2. Engage your employees and assign them roles in counting. This makes reviewing easier and avoids confusion. Assign a team for a specific category of goods and see if you need more staff for larger and broader categories.
  3. When you set out to count, ensure that there are no sales or purchases happening. Avoiding such transactions will help keep errors in counting away.
  4. To avoid confusion, choose and clear an area where you will do the real counting task. You can classify products by categories and group them together with related products.
  5. The products that you have sold but not delivered to clients should be placed aside. Be mindful of not counting them in.
  6. Print stock sheets to record counts. You can take the help of your software to do so.

During the Count

  1. You must ensure to count each item. This may be time-consuming, but it is crucial you do so. Your stock should include all categories, including work-in-progress, buffer stock, cycle stock, etc.
  2. We recommend you do not make any assumptions or leave anything to guess. This could be detrimental to your stocktaking procedure.
  3. Keep track of what is present on your shelves. Note down the locations where you count, such as warehouses, shops, or retail locations. Then enter that number next to the figure from your software system.
  4. Companies with multiple sites or warehouses must ensure that product transfers are well-tracked.
  5. This is a strenuous job, so make sure your team gets enough rest. Working continually might also lead to errors due to fatigue. Planned breaks will make everything run more smoothly.

When Counting Completes

The inventory stocktake process does not finish with a simple tally of what you have. To reap the full benefits of your efforts, you must accomplish the following:

  1. Make certain that you check and assess everything in the warehouse. This implies that you should check for the accuracy of the value of the inventory. Once done, double-check your calculations to ensure that you have accounted for everything. You can upgrade your system after checking everything.
  2. Reorder items that are nearing stock-out, and analyze your stocktaking results. Check for any differences and make a note of all aspects.
  3. Replenish the stock that runs low. Analyze the outcomes of the process.
  4. Recognize any discrepancies observed. Put in place ways to prevent them in the future.

Common Reasons for Stocktake Inconsistencies

This section lists the most common reasons for the discrepancies. Let’s check them here:

  • Capturing incorrect data throughout the inbound stock process.
  • You have misplaced stock or incorrect location.
  • Inadequate management of damaged and returned inventory
  • Stock loss as a result of theft
  • Stocktake mistakes owing to human error
  • The unit of measurement utilized while counting was incorrect.
  • The inventory system has not been updated.
  • Mislabeling of stocks
  • Stocks were mixed up with similar products.
  • Man-made errors while picking or order processing
  • Scam or fraud by the supplier
  • Inventory management software or stocktake equipment failure

While discrepancies can be a part of inventory management, it is vital to prevent them. The next section talks about the measures you can take to curb these inconsistencies.

How to Handle Stocktake Discrepancies?

Discrepancies will result in a variety of negative outcomes if you do not prevent them. This includes lost revenue and stock buildup. It may also lead to customer dissatisfaction.

Stocktake discrepancies occur when the actual amount and reported amount are different. This is true for any given product in the inventory system. Unfortunately, most firms tasked with keeping and controlling inventories face this problem.

The majority of stocktake discrepancies can occur owing to human or procedural flaws. As a business owner, you must come up with ways to address them. The list below addresses potential core reasons. But, there may be other factors of stocktake discrepancies. that are not addressed. This depends on the industry and approach.

The best strategy to combat disparities is to prevent them from occurring. The following are some common best practices for avoiding stocktake discrepancies:

Checking for flaws in Computation

The first thing you should look for is calculation errors. They are easy to start with and may provide direct insights into the errors.

Recounting the Stock

If the numbers continue to differ, it could be due to an error made during the first counting procedure. The easiest approach to fix this is to do another stock count.

Ascertaining that the Measurement Units are Correct

You must train your stocktaking staff should for the procedure. Let your staff know about the apt measurement of the unit before they begin counting. For example, let them know if they must use liters or pounds, or boxes or units.

Are there any Mixed Products?

A discrepancy may arise if one product was mixed in with others. This is a huge possibility. It happens when the products or their packaging are identical. On the same lines, ensure that they count a product correctly and do not confuse it with a similar product.

Look for Similar Items in Other Stores

You must keep similar stock should together. But it could be problematic if the warehouse personnel places the stock elsewhere. This could result in mistakes in counting. So, look for these goods in other stores to move the missing units.

Check for Overdue Orders

You may have unfulfilled orders that were billed but not picked. So use your inventory management software to locate any unfulfilled orders. Also, ensure they are not included while counting.

Check to ensure that the SKUs are correct.

Products labeled with the incorrect SKU can cause your inventory data to go haywire. Match the description in your inventory management system to that of the product you are counting.

Benefits of Stocktaking

This part of the article discusses the prime benefits of stocktaking. Let’s see what they are:

Increases Profits while Decreasing Losses and Waste

This is indeed true. You may boost your profit margins by having a realistic assessment of what you have and what is selling. It also lets you capture problems as soon as they arise.

Recognize products that perform well and which do not

The accuracy and consistency of stocktake procedures help make an informed, data-backed decision. This further aids in investing in appropriate products. Because they will show you which goods are selling and which are not. Knowing where to invest is crucial to your business. Stocktaking can make it easy for you to make that decision.

You will also be able to observe whether there is any dead stock that you should consider flash deals to move. This may imply selling at a lesser profit margin. Still it is far preferable to letting the item lie there and use up valuable warehouse space.

One of the primary goals of stocktaking is to inspect the slow-moving merchandise. This emphasizes the importance of effective inventory reduction tactics.

Registering Assets on the Balance Sheet Accurately

Inventory goes under the assets column in the balance sheet. Thus, it is very significant to list and correctly record it. Owing to these reasons, this number must be as precise as possible.
The information you collect and update as part of the stocktaking affects your finances. Stocktaking will state whether you have asset gain or shrinkage. This is why the accuracy of inventory valuation is sensitive to all financial audits.

Know Your Real-Time Stock Levels

Stocktake can also guide you toward any possible damages, shrinkages, or inventory thefts. These are some aspects that can negatively influence your stock levels. The stocktake data will  be the most plausible check data of what you recorded to what you should have.
Unfortunately, theft and damage can occur; the stocktake will reveal them as discrepancies. This will allow you to be proactive and responsive to this unpleasant fact on time. Furthermore, stocktaking demonstrates the value of stocktaking for a business once again.
The awareness of regular checks can serve as a positive deterrent to employee theft. Holding an inquiry that reveals a shoplifting problem, can help review existing store security. You may need to invest in more rigorous measures. You can consider better-quality tagging and closed-circuit cameras. All these measures enable you to have improved vigilance.

Learn about Stock Impairment

The Stocktake is instrumental in revealing where and why stock damage is occurring. If there is no stocktaking, you would think that all your stock is in sellable shape. You may face sudden stock-out situations without seeing them coming. You will end up without a sale and having unhappy customers.

Assume your business is into selling perishable goods, say chocolates. A regular stocktake procedure will help keep in check any damages to the chocolate packs. Stocktaking can help detect any case of unwanted infestations in your chocolate inventory. Detecting them sooner can prevent any further damage.

Stocktaking updates you with real-time scenario that lets you address issues in time. You may have a customer, and you realize your products are in an unsellable condition. You will have to turn away the customer, leading to losses for the company. Also, in such a situation, you are likely to lose that consumer, who will most likely go elsewhere.

Thus, stocktaking futuristically helps to determine and install preventative measures for stock preservation. You can order replacement stock ahead of time to avoid losing customers.

Timely Monitoring of Seasonal Stock and Stock with Expiry Dates

Time is critical in scenarios that concern seasonal and stock with expiry dates. That is because these aspects are time-boxed. So it is imperative you keep an eye on this type of stock. You can sell as much of it as possible before you have to sell it at a loss.

Stocktaking lets you have complete information about what you have. It would be otherwise very difficult to know about this crucial data (expiry dates). It results in a loss of gross profit. This is because expired or obsolete stock may need to be discarded. Also, you could get rid of the carrying cost of such stock and free up the space in the warehouse.

Examine Pricing Strategies

You can check your purchase prices at the time of stocking versus the most recent purchase prices by doing a stocktake. You can now assess and analyze the changes in the market and how they will affect your margins.

It is possible that there will be periods during the year when purchase prices climb. Stocktaking process helps you stay informed. You know what you should do before making any decisions. It can also help you decide if you can make an earlier investment than initially intended. The process will also say whether you should reconsider your product pricing.

Disadvantages of Stocktaking

Having seen the advantages, let’s also learn about the drawbacks stocktaking comes with.

  • Lengthy and time-consuming: Stocktaking is manually done. Unsurprisingly, it is tedious and takes a long time to complete.
  • Error-prone: As we know, manual processes are more prone to errors. When your teams work for a long time in the warehouse, there are chances of unintentional errors.
  • Difficult: Stocktaking can also be difficult at locations that are tough to reach. For example, it could be back-breaking to count in a small warehouse. Also, in a place that has too many products piled up together in too little space.
  • Cost: The cost factor can be a spoilsport. Your staff is involved, and a lot of time gets used up in completing the process. Thus, this directly impacts the finances, making stocktake an expensive procedure.

How often should you Stocktake?

You must know how frequently you will stocktake. It is an important consideration before you shortlist an inventory management system. This is crucial for your business. The answer lies in the type of your sector and the size of your business.

Also, you must understand how complex your inventory is. These factors can decide how often you should undertake the activity.
Furthermore, you will also be able to learn if you should use cycle counting or any other technique

The frequency of stocktaking could be as follows:

  • Periodic: You can stocktake monthly, quarterly, biannually, or even weekly.
  • Annual: This is more suitable for non-perishable goods.
  • Continuous: This is ideal for larger enterprises and those dealing with perishable commodities. It is most suited for businesses such as restaurants and food processing units. Because these businesses need vevry frequent stocktaking. With daily, weekly, or monthly stocktakes, stock records are updated continuously.

Tips to Know How Often You should Stocktake

Here are some considerations to keep in mind when deciding how regularly you should undertake stocktaking:

The precision of your inventory: Ask yourself questions such as ‘How precise is your inventory management?’. Fewer counts are required for more effective inventory tracking.

Perishable or non-perishable goods: How important is precision to you? If you sell perishable goods, you must conduct more frequent stocktakes.

Consider disruptions: If you do not use stocktake at regular intervals, is there a likelihood of any kind of disruption? Regular stocktaking may be a preferable alternative if you cannot afford disruption.

9 Tips for a Successful Stocktaking Process

A full stocktake once or twice a year is necessary for retail and wholesale enterprises. The process is essential to maintain healthy inventory levels and minimize losses. Additionally, it also keeps your accounting books looking good.

In other words, stocktaking can be time-consuming and energy-draining, despite being vital to your business.

Without a defined plan for success, you risk making severe human errors. These could be overcounting or undercounting. As a result, it might cost you thousands of dollars and loss of clients. A well-structured stocktaking process is a comprehensive mechanism. It will include all the processes necessary to keep your workers motivated and for uncovering anomalies and mistakes.

The big question is, how can you stay organized yet get things done quickly? This section shows us how.

Planning and Scheduling

Plan your stocktakes to minimize the impact on business operations. Try to establish a time that works for you and your team while not negatively impacting your bottom line. Ensure that your stocktaking does not hamper regular work or introduce distractions.

If you are looking to have a lengthy process, it is best performed during a slow sales cycle. You can also choose a time outside of regular business hours.

Use of Barcode Scanning

Manual counting can lead to inaccuracies, especially in larger organizations. As stocktaking is all about manual counting. It runs potential risks of inaccuracies and manual mistakes. You may reduce these risks by using barcode scanning in such a scenario. Barcode scanners can be effective tools in capturing and recording stock levels quickly and precisely.

Another advantage is that it scans and displays massive amounts of data in a single location.

Clean and Organize Stockroom

Before performing your Stocktake, clean and organize your stockroom; a well-organized stockroom will facilitate easier reviewing. Also, you can easily locate and count your inventory, reducing the likelihood of errors.

Organizing can begin by labeling or naming the shelves. This can improve the efficiency of the stocktaking process. You could also use package labels that clearly explain what product lies the boxes contain.

Drafting a well-structured stocktaking procedure for all to follow lowers the likelihood of fraud.

Prepare Your Inventory Tools in Advance

You need your team to work efficiently while stocktaking. So, before you begin the stocktaking process, ensure sure all your team members have the tools they need to do the task.

Let's look at the list of the most commonly used stocktaking tools:

  • Mobile Phones (The phones will be needed if your staff uses cloud-based inventory management.)
  • Inventory sheets
  • A clipboard
  • Sign-off sheets
  • Pens
  • Calculators
  • Portable scanners

The list above gives you a good idea of what is often needed for an efficient stocktaking procedure. You may require more or fewer pieces of equipment than those listed, though.

Set Clear Goals and Responsibilities

The stocktaking team should understand what groups they are in and what instruments they will require. They must also be aware of how they will count the stock and so on. At all times, a supervisor should be watching over the stocktaking procedure.

They can guide the team with a list of what needs to be counted and spots where they can look for it in the warehouse. This will help in double-checking the stocktakers' work.

Supervisors should also ensure that there are virtually no distractions. They must ensure that the teams are not distracted by their phones or external messages. Supervisors can also arrange for regular breaks. Especially if your stocktake is going to take a long period, it could be a good idea to arrange breaks to keep everyone fresh. This helps keep mental and physical agility intact and lowers the chances of any mistakes.

Only use Current or Updated Inventory Data

The purpose of a full stocktake is to get an exact count of your real inventory so that you may compare it to your real-time inventory data. So, eliminate things that have already been billed to clients but have yet to ship. Also, eliminate the raw materials that have arrived but have not been added to your inventory system.

Doing so makes sense as the stock that is not shipped is effectively no longer yours. Likewise, materials that are not in your inventory system is a distinct operation altogether. Thus, you need not count these during a stocktake.

Understand What and How to Count

Before starting the stocktaking procedure, you must be clear about how you would accomplish the counting. Irrespective of the size of your warehouse lay down clear directions for your team. Your warehouse may have different types of merchandise. So instruct the stocktaking team on which parts they will be counting and in what order.

Thereafter, you may establish a clear strategy for physically counting your goods.

Here are some points that can guide you in organizing the counting:

  • Working in groups: Your stocktaking team can work in groups of two. One person inspects the stock and announces the amount, while the second person records it and can double-check the first.
  • The direction of stocktaking: Your stocktaking team must count in the same direction. They could count top to bottom or left to right.
  • Eliminate ambiguity: If you have many teams for stocktaking, ensure to avoid ambiguity. Also, check that they all have non-overlapping parts to work through.
  • Using colored pens or highlighter pens: Use a colored marker or a highlighter pen to mark material as a visual reminder. This will clearly depict the items that have already been tallied.

Open the Boxes to Count without Speculating

When it comes to counting your goods in inventory, there is no speculation allowed. If a box indicates it contains ten gadgets, do not just take that label at face value. Open the package and verify if the count matches the label. Ensure that the number of contents mentioned on the box tallies with the actual amount.

The whole idea of stocktaking is to ensure that the labels and the number of actual goods tally. So, any assumptions or speculations should be kept away.

Always keep track of any differences between the counts on your stock sheet and the number of goods counted. Also, keep a record of the mislabeled/packaged boxes. This will go a long way in overseeing quality control within your inventory.

Create Strategies to Reduce Stolen or Slow-Selling Inventory

Stolen or broken inventory is part and parcel of any business. Additionally, businesses come across inventory that does not sit well among customers. It either sells slowly or does not get sold at all.

Moreover, there can be cases of theft. During the stocktaking process, you may discover that products you thought were in your warehouse are not there. You may also come across some damaged or ruined goods that were never recorded.

With this information in hand, you may strengthen security measures to defend against theft. You can also rework warehouse procedures to reduce risky behavior. Also, bring in innovative strategies to sell more merchandise.

Estimate the Accurate Value of Your Stock

Finding the right value for your stock can be called one of the primary objectives of stocktaking. Only when you know the true worth of what you have in stock do you enter it into your financial statements.

So, it becomes essential to value your stock correctly. After you have tallied all your inventory, make sure you have the most recent and updated prices for everything.

Also, account for the depreciation. Your stock's price should correspond to the market clearing price or the price that consumers are willing to pay for the product.

Consider using Dedicated Stocktaking Software

Manual process of stocktaking is a cumbersome task. Add to that the usage of excel sheets which might generate tiredness and inaccuracies. Thus, switching to a specialist software solution will help you meet precision. You can also expect your stocktaking procedure to complete expeditiously.

An apt inventory management software will allow you to observe real-time stock levels. It decreases your reliance on stocktaking for data accuracy tremendously. You can automate the procedure from start to finish with the help of barcode scanners and other technologies.

The system duly sends you alerts when an item's stock is running low. You can also configure it to automatically send purchase orders to specified suppliers. This removes the need for you to constantly track or place orders.


Understanding the typical reasons for stocktake discrepancies is the first step toward avoiding them in the future. Otherwise, you risk not tackling the underlying causes of differences. Thus, the problems will persist, causing a slew of additional complications. It will be problematic when it comes to reconciling accounts towards the end of the year.

Inventory management system is a must-have to maintain precise inventory stock levels. It can also help minimize stockouts, overstocks, and inconsistencies. These systems can provide better inventory visibility and control over each product.
Shrinkage, location errors, human errors, and poor return procedures are all significant causes. Still, not having the correct inventory management solution in place may be the most significant of them.

Thus, you can opt for an efficient system that allows you to balance inventory levels. Stocktaking is essential. But it need not be a cumbersome process.

How can Deskera Help You?

As a manufacturer, you must be on top of your inventory stock management. The state of your inventory has a direct impact on production planning, personnel and machinery use, and demand assessment.

Deskera ERP
Deskera ERP

Deskera ERP and MRP system can help you:

  • Manage production plans
  • Maintain Bill of Materials
  • Generate detailed reports
  • Create a custom dashboard

Deskera ERP is a comprehensive system that allows you to maintain inventory, manage suppliers, and track supply chain activity in real time, as well as streamline a variety of other corporate operations.

Deskera Books enables you to manage your accounts and finances more effectively. Maintain sound accounting practices by automating accounting operations such as billing, invoicing, and payment processing.

Deskera CRM is a strong solution that manages your sales and assists you in closing agreements quickly. It not only allows you to do critical duties such as lead generation via email, but it also provides you with a comprehensive view of your sales funnel.

Deskera People is a simple tool for taking control of your human resource management functions. The technology not only speeds up payroll processing but also allows you to manage all other activities such as overtime, benefits, bonuses, training programs, and much more.

Streamline Your Manufacturing Process with Deskera Today!
Contact Us Today to View a Demo of Deskera MRP!

Key Takeaways

  • Stocktaking is a process where you check, count, and record all your inventory manually. It is a significant aspect of your inventory control.
  • Manufacturers need to keep records of raw materials required to build the final goods. So, stocktaking helps them in raw material inventory management.
  • Stocktaking is important as it facilitates an efficient inventory management process.
  • It also helps meet business targets and learn about undetected stock issues.
  • Cycle counting is a stocktaking strategy that entails inspecting a specific section of your inventory on specific days on a regular basis.
  • Instead of performing a single annual count of the entire warehouse, you divide it into multiple smaller mini stocktakes.
  • The stocktaking process can be divided into three parts for an efficient process: before, after, and during the stocktaking process.
  • Incorrect data was captured throughout the inbound stock process, incorrect location or misplaced stock, and inadequate management of damaged and returned inventory are some of the common reasons for stocktake inefficiencies.
  • You can check for flaws in calculations, recount the stock, ascertain the correctness of measurement units, and check for overdue orders are some of the ways in which you can handle discrepancies.
  • Benefits of stocktaking include recognizing products that perform well, learning about stock damage, examining pricing strategies, knowing your real-time stock levels, and registering assets on the balance sheet.
  • Stocktaking is a lengthy and time-consuming process, error-prone, and difficult to carry out. These factors are the disadvantages of stocktaking.
  • Top tips for a successful stocktaking include planning & scheduling, using barcode scanners, preparing inventory tools, setting clear goals, understanding what and where to count, and accurately valuing the inventory.
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