Procurement & Inventory
Management
Stock Control
Objectives
• Define the term stocks.
• Outline the concept of stock control.
• Explain the importance of stock control.
What are Stocks?
• Stocks are current assets that a business holds for the
purpose of selling or for processing.
Do you
remember
what are
inventories?
Stock Control
• This is the management of inventories.
• It is concerned with minimising the cost of holding
stock.
• Careful stock management should be a structured
process.
• New stock should be reordered when it is required, that
is, when it falls to a certain level.
Managing Stock Levels
Importance of Stock Control
• Stock control is used to support the internal operations
of the business, as well as to meet orders from
customers.
• Stock control helps with:
– Prevention of pilferage
– Control of inventory
– Signaling of market trends
– Monitoring availability of capital
– Monitoring of storage space
Prevention of Pilferage
• Pilferage means the stealing of stock.
• It can be minimised by:
– Recruiting people who have good references
– Having clear disciplinary policy
– Having secure storage with limited access
– Regularly reconciling stock so pilferage is discovered early.
Control of Inventory
• Control stock by:
– Recording all stock entering and leaving the business.
– Carry out stock reconciliations to check the accuracy of stock
levels
– Setting maximum and minimum stock levels for each item
– Re-ordering stock when a specified level is reached, and
ensuring that the amount held never exceeds maximum stock
levels.
Signalling of Market Trends
• If demand for finished goods is high, then output must be
increased as stock levels will diminish quickly.
• If the stock is less popular, then stock levels will build up.
• Therefore stock levels can help production know which goods
to produce more of, as well as providing information for
marketing.
Availability of Capital
• A business uses cash to buy stock, which it then sells.
However if stock takes a long time to sell, it ties up capital
which could be used to finance other things in the business.
Storage Space
• The quantity of stock a business holds will determine the
amount of storage space it needs.
• Poor stock management can lead to high stock levels and an
increased need for storage, which is costly.
Group Activity
A large supermarket has the following stock problems. Suggest why
these problems might have arisen and what could be done about it?
The Supermarket has a large refrigerator store for frozen meat and fish,
and frozen packet foods. The supermarket is finding that it is having to
Group 1
stock more and more frozen meat and fish, so the chillers and freezers
are over-full.
The Supermarket has found that some of the fresh fruit and vegetables
Group 2 that it sells are running out very quickly, while others pile up and some
rotten.
The profit level in the drinks section of the supermarket seems to be
Group 3
falling unexpectedly, even though sales of drinks are high as ever.
The Supermarket has found that its overall profit is falling, even though its
Group 4 sales are high. There are some gaps on the shelves, while other stock is
selling very slowly.
