what are the methods of stock control

Stock Control Methods

1. FIFO (First-In-First-Out)
2. LIFO (Last-In-First-Out)
3. Just-In-Time
4. Economic Order Quantity (EOQ)
5. Gross Margin Return on Inventory
6. ABC Analysis
7. Merchandise Management

Full Answer

What are the main methods of checking stock?

Whichever stocktaking method you decide is best for you, stocktaking will provide the following crucial information for your business:

• Determines how well your business is operating
• Confirms your gross profit
• Pinpoints if you have any stock problems, i.e. theft
• Aids you with your pricing strategy
• Provides an accurate account of the stock you hold
• Highlights specific good and bad product sales performance
• Identify how to reduce stock levels and improve cash flow

What are stock control procedures?

monitoring stock levels and dealing with changes in supply and demand, as well as methods of controlling stock movements and reducing the likelihood of theft. Working through this unit There are two sections in the unit Stock control procedures: 1. Monitoring stock levels 2. Controlling stock movements

What is the Golden Rule of stock control?

food, new stock might be used . before old stock. • Follow the ‘first in, first out’ system of stock rotation, so that older stock is used first. This helps to avoid . waste. • Train your staff in stock control and make sure they know in what order to use foods. • Check regularly that stock control is being carried out

What are the disadvantages of a stock control system?

Disadvantages Perpetual Inventory System. Besides the above of perpetual inventory system, it suffers from the following limitations: (i) The system is expensive and a small concern cannot afford to implement this system. (ii) The information about actual stock of a particular item on a particular day may not be available, only figures above ...

What are 4 stock control methods?

What are the methods of stock control?Just-in-time (JIT)FIFO.Economic Order Quantity.Vendor-managed inventory.Batch control.

What are the methods of stock taking?

Most Popular Stocktaking MethodsPeriodic Stock Verification. This process is carried out every month, quarterly, bi-annually or annually depending on the volume of the goods your business handles. ... Continuous, Perpetual Or Automatic Stock Verification. ... Spot Checks. ... Annual Stocktaking.

What is stock control techniques?

Effective stock control methods Just In Time (JIT) aims to reduce costs by cutting stock to a minimum - see avoid the problems of overtrading. 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.

What are the three stock control systems?

Types of Inventory Control SystemsPerpetual inventory system. A perpetual inventory control system tracks inventory in real-time. ... Periodic inventory system. A periodic inventory system is kept up to date by a physical count of goods on hand at specific intervals.

What is stocktake process?

Stocktaking is the process of physically checking stock levels for each of the products and materials you sell to make sure that your data is up to date and accurate. It's important to have a fine grasp of your stock management to make sure your business can grow.

What are the 4 types of inventory?

There are four main types of inventory: raw materials/components, WIP, finished goods and MRO.

What are the 2 methods of inventory control?

In general, there are two methods of inventory control: manual and perpetual.

What is the FIFO method?

First In, First Out, commonly known as FIFO, is an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first. For tax purposes, FIFO assumes that assets with the oldest costs are included in the income statement's cost of goods sold (COGS).

What is the importance of stock control?

The purpose of stock control is to reduce the costs of holding stock while ensuring you can meet customer demand and making sure that there's enough material for production. Businesses should always have a 'safe' amount of stock so that they're able to react and cover any unforeseen issues.

What are the 3 major inventory management techniques?

The three most popular inventory management techniques are the push technique, the pull technique, and the just-in-time technique. These strategies offer businesses different pathways to meeting customer demand.

What are the 5 types of inventory?

Depending on the business, inventory can include raw materials, component parts, work in progress, finished goods, or any packaging.Raw materials inventory. ... Maintenance, Repair, and Operating (MRO) inventory. ... Decoupling inventory. ... Work In Progress (WIP) inventory. ... Finished goods inventory.More items...•

Why is it important to control stock?

Controlling stock is essential to a business’ success. Overstocking can result in insufficient liquidity whilst understocking can make it impossible to satisfy your customers’ demands. Stock is how your business makes money and stays afloat, so to ignore keeping it under control can mean serious consequences.

Where did the stock control system originate?

This stock control system originated in Japan. As the name suggests, stock is ordered as and when it is required to keep costs down and liquidity high. However, the increased cashflow comes at a cost.

What is vendor managed inventory?

Vendor-managed inventory (VMI) Vendor-managed inventory (VMI) is a relatively new model of stock management that emphasises shared risk between the buyer and supplier.

What can software do for a business?

As your business functions, the software can advise you of necessary action, such as ordering new products once your stock hits a certain level . This can help you make data-informed decisions to help avoid overstocking. 3. Explore integrated technology.

1. FIFO (First-In-First-Out)

One of the most common methods, FIFO is straightforward and the least complicated to implement. It calculates the value of your inventory according to when products were first acquired and sold. This method works best for specialty retailers and those who sell perishable goods.

2. LIFO (Last-In-First-Out)

Opposite of FIFO, this method determines the value of inventory according to the most recently acquired products. LIFO gets a little more complicated because it ignores the costs for older stock, which creates discrepancies within the costs of goods sold (COGS).

3. Just-In-Time

Just-In-Time relies on robust sales and market data to deliver accurate forecasting. To help with this, an automated point of sale software enables retailers to order inventory when it’s needed. The benefits of this method are: reducing expenses, overstock, and waste.

4. Economic Order Quantity (EOQ)

This method uses sales and market data, as well as ordering and carrying costs to determine the most profitable inventory levels. With EOQ, smaller retailers would need to order large quantities and increase warehouse space. That’s why EOQ is best for mid-size retailers with multiple locations.

5. Gross Margin Return on Inventory

This method focuses on three things: inventory costs, pricing, and turnover. It provides valuable insight into merchandise choices and indicates how well your inventory is being managed. Any slow performers can tie up cash and increase carrying costs.

6. ABC Analysis

ABC analysis combines product values and sales frequencies to get a better understand of which ones are the most profitable. It places all of your products into one of three categories:

7. Merchandise Management

Also known as Open-To-Buy, merchandise management focuses on total inventory at the beginning and close of every month. Your inventory turnover plays a major role in this method because ordering too little or too much will affect profitability.

What is stock control?

Stock control for production scheduling and ordering inventory is a core part of managing a business enterprise. Warehouse managers use a variety of stock review techniques that can range from the most simple to complex models. The goal of any stock control method, however, is to maintain efficient inventory and production levels that ensure that products and goods are replenished in a timely manner and that profits are maximized by avoiding overstocking and under-stocking.

What is economic order quantity?

Economic order quantity, or EOQ , is a stock control and production scheduling method that aims to establish stock quantities at the lowest possible costs. The EOQ formula uses factors such as a stock item's fixed cost, annual turnover rate and storage and delivery costs to make complex calculations that establish the optimal stock level for an item.

What is JIT in manufacturing?

Just in time, or JIT, is a cost-cutting inventory control method used frequently in the manufacturing industry to maintain the absolute minimum stock levels. Inventory is ordered when it is needed with the goal of reducing holding or carrying costs. The reliability of a supplier's delivery times is central to efficient JIT operations. If supplier delivery times are not predictably consistent, warehouse management will not be able to use this important factor in JIT forecasting and runs the risk of frequent stock shortages.

How often do you order stock?

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. Printer-friendly version.

What is batch control?

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. 4. First in, first out - a system to ensure that perishable stock is used efficiently so that it doesn't deteriorate.

What is stock control?

Stock control, also known as inventory control, is the process of maintaining the appropriate quantity of stock, so a business can meet customer demand without delay while keeping the costs of holding stock to a minimum. Businesses dealing with physical products need stock to sell. The purpose of stock control is to make sure ...

Why is stock control important?

Stock control is important because it can be the difference between loss and profit.

How to control inventory?

1. Stick to a single inventory control system. It is important to ascertain from the beginning what type of inventory system would best suit your business. The two options are periodic systems or perpetual systems, of which the latter is highly recommended for accuracy and ease of use. 2.

How to improve liquidity?

Purchasing should be based on sales history and demand forecasting. Ordering less stock more frequently. This can improve liquidity without reducing sales. Consider the impact of marketing and promotion. Before launching a sales promotion, make sure you have enough stock to meet an increase in demand.

Methods for Stock Control Management

There are various methods for inventory control depending on variables such as average output and demand. Common techniques include-

Tips to Maximize Profits

It is possible to properly manage inventory while preventing over and under spending by following these tips- 1. Define Processes and Types of Stock It is important to outline production processes, different types of inventory items, and when they are used.

What is stock control?

Stock control, also known as inventory control, is the process of optimizing stock levels in a warehouse (s) to stabilize inventory storage costs while maintaining enough stock to meet customer demand. If done right, proper stock control can optimize logistics costs while ensuring you have just enough stock stored at all times.

How does stock control help logistics?

If done right, proper stock control can optimize logistics costs while ensuring you have just enough stock stored at all times. In order to control stock, you will need access to tools and data to make better predictions on supply and demand.

Why is historical order data important in ecommerce?

Historical order data helps with forecasting demand, which can also help to provide insights into which items you need to reorder at the SKU level in given time period.

What is FIFO method?

The FIFO method requires the first batch of inventory that arrived in the warehouse to be sold first and shipped out first. This makes it easy to calculate costs and value of inventory despite any changes in supplier pricing.

Why is it important to store inventory across locations?

You can easily visualize where your customers are, and compare your current and ideal distribution to optimize product allocation: Another benefit of storing inventory across locations is that it allows you to have backup stock in case of emergency ( e.g., unexpected warehouse closure due to bad weather).

What is JIT inventory?

Just-in-time (JIT) The JIT inventory method refers to ordering as much stock required to meet customer demand, but it also requires the ability to order quickly soon after to meet the next batch of orders.

What happens if you don't order enough stock?

But not ordering enough stock can cause items to be out of stock, can lead to backorders, and cause a decline in customer satisfaction. Obviously, each scenario is less than ideal.

FIFO

LIFO

• Opposite of FIFO, this method determines the value of inventory according to the most recently acquired products. LIFOgets a little more complicated because it ignores the costs for older stock, which creates discrepancies within the costs of goods sold (COGS). Companies dealing in commodities, such as gas and raw materials, usually use this method...

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Just-In-Time

Economic Order Quantity

Gross Margin Return on Inventory

ABC Analysis

Merchandise Management