The Art of Stock Control
Stock control is a central part of the logistics chain to any business. There are many different stock control methods but selecting the right one for your business is an art form.
As an avoidance, many companies will opt for the ‘Just In Time’ (JIT) approach, but this requires your suppliers to be able to deliver raw materials exactly when you require them, which is not always possible. Despite being flexible, allowing you to stay up to date developing new products without wasting stock, and the added advantage of lower storage costs, if your suppliers or profit margins don’t allow you to gain your raw materials when you need them, you lose on sales instantly.
The first part of effective stock control is understanding how much stock you should keep. While having a large quantity of stock may give you low management costs and possibly be cheaper when buying raw materials in bulk, storage and insurance costs all rise significantly and certain goods could perish or be outdated before it is even used. Most importantly though, your capital is tied up in physical products. The volume of stock required is completely dependent on your business; how much time your customers are prepared to leave between their order and receipt of a product, how predictable your sales are, how perishable your stock is…there are many different factors.
The size of your business, available funds and variation of stock are all crucial for deciding whether to use manual stock control methods or dedicated software. Manual stock taking is first and foremost far more time consuming. Often codes, such as barcodes, make the process simpler. Stocktaking is typically done either annually or constantly throughout the year. There are three key methods of manual stocktaking; 1) a stock book – a simple log of stock issued and received, 2) a recorder system – keeping stock in batches so that at a certain level of depletion you know to reorder, and 3) stock cards – each stock type has an associated card detailing value, location, reorder levels, stock history and supplier details. Any combination or variation of these methods can be used, as long as your are effectively able to track stock levels, make orders and issue stock.
The benefit of stock control software is that is often calculates the Economic Order Quantity (EOQ), a calculation of the correct balance of stock to ensure you hold neither too much nor too little. A complicated formula, software allows calculation almost instantaneously. The main advantage of stock control software, however, is the ease at which you can retrieve and supply information. Often the software can integrate with accounting and invoicing systems as well as changing the levels of stock automatically upon issue or receipt of any stock. Typically it also helps to find the cheapest and fastest suppliers. There are many different pieces of software available, all of which have different features. To find the best suited for you, you need to consider your requirements; do you need multiple prices or currencies, integration with other systems or quality control?
Quality is often forgotten in the process of stock control – it’s not just about the quantity. Goods need to be checked systematically so that faults can be identified and removed, especially if products are produced in batches where a problem might not be isolated. Again the use of codes help in this identification process. Achieving high standards with recognition from organization such as the British Standard Institution (BSI) also help to certify your business as one of quality, showing both customers and regulators that your take quality control seriously, as well as quantity.