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Unit 6: Stock Management
6.2 Various Types of Stock Checks Notes
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. For
further information, see the page in this guide on 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 Re-order Level.
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 and used immediately. There is a risk of running out of stock, so you need
to be confident that your suppliers can deliver on demand.
These methods can be used alongside other processes to refine the stock control system. For
example:
Re-order lead time – Allows for the time between placing an order and receiving it.
Economic Order Quantity (EOQ) – A standard formula used to arrive at a balance between
holding too much or too little stock. It’s quite a complex calculation, so you may find it easier to
use stock control software.
Batch control – Managing the production of goods in batches. You need to make sure that you
have the right number of components to cover your needs until the next batch.
If your needs are predictable, you may order a fixed quantity of stock every time you place an
order, or order at a fixed interval – say every week or month. In effect, you’re placing a standing
order, so you need to keep the quantities and prices under review.
First in, first out – A system to ensure that perishable stock is used efficiently so that it doesn’t
deteriorate. Stock is identified by date received and moves on through each stage of production
in strict order.
Notes Effective stock control is essential in the retail industry. The more stock a store
holds the greater the amount of money that is tied up and this can have a significant effect
on company profits. Different stores have different ways of controlling and ordering new
stock.
Self Assessment
State whether the following statements are true or false:
6. There is only a single method for controlling stock, all designed to provide an efficient
system for deciding what, when and how much to order.
7. You identify a maximum stock level, and re-order when stock reaches that level. This is
known as the Re-order Level.
8. Just in Time (JIT) aims to increase costs by cutting stock to a minimum.
9. Re-order lead time does not allow for the time between placing an order and receiving it.
10. The more stock a store holds, the lesser is the amount of money that is tied up and this can
have a significant effect on company profits.
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