Inventory control is the means by which materials of the correct quality and in
correct quantity are made available as and when required with due regard to
economic in storage and ordering cost. Hear the desired level of inventory can neither
be high or low because high level inventory will lead to increase in carrying cost
while low level of inventory will lead to increase in ordering cost.
There are several methods for controlling stock, all designed to provide an
efficient system for deciding what, when and how much to order.
You may opt for one method or a mixture of two or more if you have various
types of stock.
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Minimum stock level - you identify a minimum stock level, and re-order
when stock reaches that level. This is known as the just in time method.
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Stock review - you have regular reviews of stock. At every review you
place an order to return stocks to a predetermined level.
Just In Time (JIT) - this aims to reduce costs by cutting stock to a minimum.
Items are delivered when they are needed for immediate use. This means that less
storage is needed however there is a risk of running out of stock, so you need to be
confident that your suppliers can deliver on demand.
Stock control systems - keeping track manually
Stocktaking involves making an inventory, or list, of stock, and noting its
location and value. It's often an annual exercise - a kind of audit to work out the value
of the stock as part of the accounting process.
Codes, including barcodes, can make the whole process much easier but it can
still be quite time-consuming. Checking stock more frequently - a rolling stock take -
avoids a massive annual exercise, but demands constant attention throughout the year.
Radio Frequency Identification (RFID) tagging using hand-held readers can offer a
simple and efficient way to maintain a continuous check on inventory. Any stock
control system must enable you to:
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track stock levels
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make orders
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issue stock
The simplest manual system is the stock book, which suits small businesses
with few stock items. It enables you to keep a log of stock received and stock issued.
It can be used alongside a simple re-order system. For example, the two-bin
system works by having two containers of stock items. When one is empty, it's time
to start using the second bin and order more stock to fill up the empty one.
Stock cards are used for more complex systems. Each type of stock has an
associated card, with information such as:
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description
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value
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location
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re-order levels, quantities and lead times (if this method is used)
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supplier details
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information about past stock history
More sophisticated manual systems incorporate coding to classify items. Codes
might indicate the value of the stock, its location and which batch it is from, which is
useful for quality control.
Choose a system
There are many software systems available. Talk to others in your line of
business about the software they use, or contact your trade association for advice.
Make a checklist of your requirements. For example, your needs might include:
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multiple prices for items
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prices in different currencies
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automatic updating, selecting groups of items to update, single-item
updating
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using more than one warehouse
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ability to adapt to your changing needs
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quality control and batch tracking
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integration with other packages
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multiple users at the same time
Avoid choosing software that's too complicated for your needs as it will be a
waste of time and money.
Using RFID for inventory control, stock security and quality management
Radio Frequency Identification (RFID) allows a business to identify individual
products and components, and to track them throughout the supply chain from
production to point-of-sale.
An RFID tag is a tiny microchip, plus a small aerial, which can contain a range
of digital information about the particular item. Tags are encapsulated in plastic,
paper or similar material, and fixed to the product or its packaging, to a pallet or
container, or even to a van or delivery truck.
The tag is interrogated by an RFID reader which transmits and receives radio
signals to and from the tag. Readers can range in size from a hand-held device to a
"portal" through which several tagged devices can be passed at once, eg on a pallet.
The information that the reader collects is collated and processed using special
computer software. Readers can be placed at different positions within a factory or
warehouse to show when goods are moved, providing continuous inventory control.
Using RFID tagging for stock control offers several advantages over other
methods such as barcodes:
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tags can be read remotely, often at a distance of several metres
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several tags can be read at once, enabling an entire pallet-load of products
to be checked simultaneously
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tags can be given unique identification codes, so that individual products
can be tracked
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certain types of tag can be overwritten, enabling information about items
to be updated, eg when they are moved from one part of a factory to another
The costs associated with RFID tagging have fallen over recent years, and
continue to do so, to bring the process within the reach of more and more businesses.
The benefits of more efficient stock control and improved security make it
particularly attractive to retailers, wholesalers or distributors who stock a wide range
of
Control the quality of your stock
Quality control is a vital aspect of stock control - especially as it may affect the
safety of customers or the quality of the finished product.
Efficient stock control should incorporate stock tracking and batch tracking.
This means being able to trace a particular item backwards or forwards from source
to finished product, and identifying the other items in the batch.
The British Standards Institution (BSI) has a scheme to certify businesses that
have achieved a certain standard of quality management. Achieving the standard is
one way of showing customers and regulators that you take quality control seriously.
Stock control administration
There are many administrative tasks associated with stock control. Depending
on the size and complexity of your business, they may be done as part of an
administrator's duties, or by a dedicated stock controller.
For security reasons, it's good practice to have different staff responsible for
finance and stock.
Typical paperwork to be processed includes:
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delivery and supplier notes for incoming goods
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purchase orders, receipts and credit notes
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returns notes
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requisitions and issue notes for outgoing goods
Stock can tie up a large slice of your business capital, so accurate information
about stock levels and values is essential for your company's accounting.