Stock control and inventory
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.
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, it's time to start using the second bin and order more stock to fill up the empty one.
Stock cards are used for more complex systems. Each type of stock has an associated card, with information such as:
• re-order levels, quantities and lead times (if this method is used)
• supplier details
• information about past stock history
More sophisticated manual systems incorporate coding to classify items. Codes might indicate the value of the stock, its location and which batch it is from, which is useful for quality control.
Choose a system
There are many software systems available. Talk to others in your line of business about the software they use, or contact your trade association for advice.
Make a checklist of your requirements. For example, your needs might include:
• multiple prices for items
• prices in different currencies
• automatic updating, selecting groups of items to update, single-item updating
• using more than one warehouse
• ability to adapt to your changing needs
• quality control and batch tracking
• integration with other packages
• multiple users at the same time