Author: Jim Riley Last updated: Sunday 23 September, 2012
A simple approach to checking the level of stock in a business is to count it on the shelves – this is called stock-taking. For many businesses, such as a small shop, this is a thoroughly practical approach. Most businesses conduct an ‘annual stock take’ when stocks are checked in considerable detail to find any discrepancies between what is physically and the stock records. This is also a good time to check for any obsolete or out of date stock that needs to be disposed of.
Most businesses try to use up older stock first to help avoid stock deterioration or becoming obsolete – this is known as stockrotation. You have probably noticed that supermarkets always load the freshest stock to the back of the shelves.
Computerised stock control
Large businesses such as the major retailers use computerised systems to manage stocks of tens of thousands of items, some of which are replenished several times a day. As stock arrives, and again as it is sold, scanning of bar codes keeps the levels up to date.
Automatic re-ordering of stock
As bar codes on products are scanned at the checkout, the system is taking those sales into account as part of a program to re-order stock. Rather than manual stock-taking by counting product on the shelves or in the warehouse, the supermarket has detailed real-time stock level information that the system uses to place re-orders through EDI (Electronic Data Interchange).
Information such as weather forecasts, public holidays and major sporting events can be used to help determine the stock level of seasonal products – such as beer, ice cream and food for barbecues. Huge amounts of data are available from sales around the country to help determine what stock to have in place on different days of the week and even at different times of the day.
The major supermarkets such as Tesco have developed stock management as one of their core competencies and derive competitive advantage from having the right stocks on the shelves when customers want them.
Just-in-time (JIT) stock control
JIT stock control means that stock is only ordered to meet specific orders, and little or no product is held in stock. This requires very responsive and reliable suppliers who can meet stringent requirements to deliver exactly the right stock to a precise location and within a narrow time frame. See the revision notes on Lean Production for more details of JIT.