How to control stock
Checklist
- Identify and list the different items you use and produce: raw materials, other consumables, spare parts and your own products.
- Establish who uses each stock item and who should be responsible for managing it.
- Focus your stock control efforts on critical items which are most important to your business and must be immediately available.
- Analyse your usage of each item; note any seasonal variations.
- Identify the lead time for restocking and other options such as faster delivery for an additional cost or from a local supplier.
- Set a minimum stock level to cover your requirements over the delivery lead time.
- Assess the costs of holding stock, including financing, insurance and storage, and the risk of losses through deterioration or obsolescence.
- Calculate the most cost-effective order size, based on delivery costs, volume discounts, usage requirements and stockholding costs.
- Plan and organise your storage areas. Take into account environmental requirements (eg temperature and humidity), handling and safety (eg heavy items), accessibility to the most frequently required items and security.
- Set up systems for receiving and issuing stock; ensure that perishable stock is properly rotated and the oldest stock is issued first.
- Decide how you will check stock to determine reorder requirements (eg by counting, weighing or casual inspection) and how often this should happen.
- Periodically carry out a complete stock check; check items more frequently where you suspect problems (eg theft or excessive wastage).
- Periodically identify and dispose of excess or obsolete stock: for example, through special offers or simply by scrapping it.
Cardinal rules
Do:
- focus your efforts on critical stock items
- determine minimum stock levels
- store and handle stock safely and securely
- rotate stock
- make periodic stock checks
Don't:
- waste time controlling trivial stock items
- tie up capital and space storing excessive stock
- hold on to obsolete stock
