Stock control is used to show how much stock you have at a point in time, and how you keep track of it.
It applies to every item you use to produce from raw materials to finished goods and whether it is a product or service. It covers stock at each stage of the production process, from purchase and delivery to using and re-ordering the stock.
Having the right amount of stock is important as it ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.
Types of stock
Everything you use to make your products, provide your services and to run your business is part of your stock.
Types of stock: raw materials and components (used in production) work in progress (unfinished goods in production) finished goods (ready for sale) consumables (fuel and stationery etc)
How much stock should you keep?
The size and nature f your business decided how much stock to keep, and the type of stock involved. If you are short of space, you may be able to buy stock in bulk and then pay a fee to your supplier to store it, calling it off as and when needed.
Keeping little or no stock and negotiating with suppliers to deliver stock as you need it
Lower storage costs
You can keep up to date and develop new products without wasting stock
Efficient and flexible - you only have what you need, when you need it
Risk of running out of stock
Meeting stock needs can become complicated and expensive
You are dependent on the efficiency of your suppliers
This might suit your business if it's in developing environment or if your stock is expensive to buy and store. This method is also useful if your stock is perishable or is able to be replenished quickly.
Keeping large numbers of stock
Low management costs
You will never run out
Easy to manage
Cheaper if you buy in bulk
Not good for perishable goods
Stock may be come out of date before it is used
Stock may depreciate with time
Higher storage and insurance costs
Stock control methods
There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order.
You may opt for one method or a mixture of two or more if you have various types of stock.
Minimum stock level - you identify a minimum stock level, and re-order when stock reaches that level. This is known as the just in time method.
Stock review - you have regular reviews of stock. At every review you place an order to return stocks to a predetermined level.
Just In Time (JIT) - this aims to reduce costs by cutting stock to a minimum. Items are delivered when they are needed for immediate use. This means that less storage is needed howver there is a risk of running out of stock, so you need to be confident that your suppliers can deliver on demand.
Stock control systems - keeping track manually
Stocktaking involves making an inventory, or list, of stock, and noting its location and value. It's often an annual exercise - a kind of audit to work out the value of the stock as part of the accounting process.
Codes, including barcodes, can make the whole process much easier but it can still be quite time-consuming. Checking stock more frequently - a rolling stocktake - avoids a massive annual exercise, but demands constant attention throughout the year. Radio Frequency Identification (RFID) tagging using hand-held readers can offer a simple and efficient way to maintain a continuous check on inventory. Any stock control system must enable you to: track stock levels make orders issue stock
The simplest manual system is the stock book, which suits small businesses with few stock items. It enables you to keep a log of stock received and stock issued.
It can be used alongside a simple re-order system. For example, the two-bin system works by having two containers of stock items. When one is empty,…