Importance of Stock Control

STOCK CONTROL

What is stock control and why does it matter?

Stock is the total merchandise kept on hand by a merchant, commercial establishment, warehouse or manufacturer for production or sales, and can be categorised as: raw materials and components, finished goods, work in progress and consumables

Stock control is the activity of checking an undertaking’s stock and includes various aspects of controlling the amount of stock on shelves and in the stock room, and also how reordering is done

To do this, there should be a management report indicating what has been sold, how quickly it was sold and its prices .

Features of a stock control system are:

(i)  Ensuring the products on the shelf in the shops are in the right quantity;

(ii) Recognising when a customer has bought a product;

(iii) Automatically establishing when more products should be put on the shelf from the stockroom;

(iv) Reorderingstockattheappropriatetimefromthemainwarehouse;and

(v)  Coming up with management information reports

The aim of stock control is to minimise the

cost of holding the stock while ensuring that there are enough materials for production to continue to be able to meet consumer demands

In addition, the benefits of reduced warehouse costs must be balanced against the cost of more frequent deliveries and lost economies of scale from bulk-buying discounts

ADVANTAGES OF STOCK CONTROL

• Records are kept in a compact manner and so reference to them is facilitated
• Division of labour between record keeping and actual material handling is possible
• Ensures that only the right amount of stock is on the shelves – e.g. where there is too much stock on the shelves, the company might be incurring unnecessary warehouse charges and posing a risk of expiry with perishable products
• Save a lot of staff time, thereby reducing the number of staff needed and improving profits

DISADVANTAGES OF STOCK CONTROL

Poor stock control leads to problems associated with overstocking and these effects include:

• It increases costs for businesses as holding stocks are an expense for the firm
• Increases warehouse space needed
• Higher insurance costs
• Higher security costs
• Danger of damage in relation to perishables
• Danger of running out of stock
•  Potential loss of sales or missed orders which can harm the company’s reputation