What Are Stock Control Procedures?

Stock control is a term for any and all procedures involved in monitoring and managing the amount of stock in your business at any given time.

For almost all businesses which use stock, stock is their single largest investment. This makes efficient stock control vital to your company’s success.

Developing your stock control procedures involves three basic actions:

• Determining Stock Level Policy
• Implementing Inventory Control
• Cross-Checking Inventory Control

Stock Level Policy

What is an appropriate amount of excess inventory to hold? The answer is obviously different for wholesalers and retailers, for convenience stores and supermarkets, for different industries.

Some businesses may have wildly different rules for excess stock in different departments. For example, an electronics retailer probably needs to keep far more batteries or extension leads on hand than widescreen TVs and other prestige items.

This is the basis of stock level policy – and stock level policy is fundamental for inventory control.

Inventory Control

Inventory control combines stock level policies with projected sales or production, depending on the type of business you’re running. Because these function in the same way, they’re both sometimes called projected run rate.

Projected run rate gives you the expected amount of inventory needed over a given time period. Stock level policy tells you how far over that to keep your stock levels for each product.

Cross-Checking Inventory Control

Inventory management software streamlines inventory processes. It can be a huge advantage. But there are a few things it can’t do – it won’t catch shrinkage (inventory which has spoiled, been damaged, been lost, or stolen) as it happens. Cross-checks are necessary to confirm your inventory records. These are known as stock audits.

Mastering the Stock Control Process

Maximum Stock Level

Every business using physical products has a limited amount of storage space. That storage needs to be divided up among the products or raw materials sold or used by the business.

Should every product have the same amount of space set aside for it?

Obviously, this will almost never be true. For one thing, not all products or components are the same size.

In retail, faster selling products will need more items in stock. Products with higher margins are more important to keep in stock. Manufacturing companies need to balance both these questions and the fact that (for example) the same amount of materials might make two wardrobes or one chest of drawers.

Your storage space has to find an appropriate balance of all these factors. When designing your layout, remember to set some space aside for surprise spikes in demand – if you suddenly need to order in more of a given product than usual, you’ll need somewhere to put it that doesn’t violate health & safety regulations.

Remember to take run rate into account. It’s actually unlikely that your business needs an amount of stock that exactly fills your storage facility. Either your facility has more space than you need, or less.

Your maximum stock levels for each product should all be able to fit into your storage space. But they don’t need to fill it completely. After all, holding stock costs money.

Knowing how quickly you’ll need to replace stock tells you whether or not you can take significant advantage of supplier discounts.

At first glance, they seem like an easy decision – you’ll be tying up less of your money for the same amount of stock (or more). But the temptation to use them to stock up further is always there. And if your shrinkage rate is too high, relative to the cost of stock, this can actually cost you more.

The same is true for volume discounts. If you don’t have a market for volume, these discounts can hurt more than they help.

The Stock Control Chart – What is it?

It’s a simple tool, but a stock control chart is useful if you keep one for each product and keep it updated.

Why? Because you’ll see patterns in order rate much more quickly and easily than you would with just the numbers.

How long does it take to trigger a new order after a re-stock? Does it change significantly over time? If you have stock control charts going back for years, you can quickly highlight patterns in ordering over the year, or see whether a demand for a specific product is over time.

These charts can also be used to see if there’s a case for changing re-order or maximum stock levels over time.