Control of Stock Levels



Controlling Stock Levels
A great deal of cash and other investment is tied up in the stock of a business. You need to manage your stock in such a way that there is sufficient quantity for customers when they need it and yet the business won't run into financial strife because too much money is tied up in the stock sitting on the shelves. Managing and controlling stock is something that needs to be learnt by the owner of the business and advice may be needed from your accountant or other adviser.

You need to control and manage your stock for these reasons:

  • You have a lot of money tied up in your stock, so the level you keep is critical. If the levels are too high at times, you have to make a decision to quit the stock and turn it into cash, to improve your cash flow and clear the warehouse for new stock. At good system will allow you to see when this is a problem, so you can take whatever action is necessary to correct it.

  • The information that comes through from a good stock control system will enable you to see how often your stock is turning and then compare hour stock turnover rate with the average in the industry. If your stock turn rate is less than your competitors you will have to do something about it.

  • You need to have a good stock control system. You need a good system that allows you to have access to the stock as soon as the customer wants it. You don’t want to lose a sale, but at the same time you don’t want to have stock sitting on the shelves that is not moving. Stock control is part of your day-to-day operation and it is a vital aspect of your business.

    Your production can be interrupted by a breakdown when the right materials or stock are not on hand. There is nothing more frustrating for the production staff when particular items are not available to complete a job. You don’t want to overstock because you run the risk of tying up too much money unnecessarily in stock levels and if you carry too little stock, you can lose a contract or a sale because your customers will go elsewhere.


Watching the Stock Levels
Managing your stock is to do with balancing the cost of keeping your stock levels down versus the cost of having enough stock to meet the needs of production or your customers.

The cost of carrying low stock levels is:

  • Loss of potential sales.
  • Increased costs in ordering.
  • Loss of time in production.


Better Stock Control
Stock sitting on your shelves for long periods unsold is tying up money in the business, which is not working to product profit.

If you want better stock control, here are some suggestions:

  • Know what your stock turn rate is for all the main items of your inventory.
  • Get rid of outdated or slow moving merchandise by sales or discount, because the longer it sits on the shelves the harder it will be to move.
  • Have tough controls on the stock items that are important and have basic controls for the other stock items that are not so important.
  • Look at the viability of having your products outsourced to a manufacturer, rather than making it yourself.
  • Check the security of your stock so that it is not subject to theft by staff or others.
  • Look at your whole system of purchasing and stock control.