Stock Management is the function of understanding the Stock mix of a company and the different demands on that stock. The demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. Stock management is important for every other business enterprise.
Efficient stock control requires understanding the mix of different kinds of stock and acknowledging the demands on that stock. This help keep stock at a reasonable level, balancing the need for surplus supplies with the need to reduce tied-up capital.
There are four main categories of stock or inventory:
Raw Material and components: stock that is ready to be used in the production of goods.
Work In Progress: unfinished goods that are still in production.
Finished good: items that are ready for sale.
Consumables: stock that will be used in the daily running of the business and will need updating, for example, fuel and stationery.
- Periodic stock management: this system of inventory valuation requires physical inventory accounts at specific intervals. This method of stock management is suitable for small businesses with minimal inventory and is much cheaper than electronic tracking systems. However, this method is not suitable for large companies with extensive inventories because physical stock takes are time-consuming.
- Perpetual stock management: this system relies on electronic tracking and POS system, to record and track inventory on a continual basis. Whilst this is a more expensive system than physical inventory counts, it gives a more accurate and up-to-date indication of stock levels and removes the risk of human error.