In this article, learn about:
What stock control is
The methods of stock control
How to implement stock control
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Imagine sending out a shipment, only to realize you didn't have enough stock to begin with—or worse, discovering shelves full of products no one needs right now. That’s where stock control comes in. It’s not just about counting boxes; it’s about staying in tune with what’s moving, what’s slowing down, and making sure your inventory reflects the needs of the business.
What is Stock Control?
What is stock control, and what is inventory control? The truth is that the two terms are synonymous. Stock control, or inventory control, is when a business ensures the proper amount of stock.
Ideally, a supplier will meet the customer’s demand without any delays and without paying for holding fees of excess stock. Good stock control helps keep customers happy by making sure the right products are on the shelves when they need them. While it can be hard to find the perfect balance, maintaining stock control can help suppliers get to a place where they are as close to this ideal balance as possible.
Related Reading: The Basics of Walmart Replenishment
Stock control, or inventory control, has been around as long as commerce itself. For centuries, merchants have known that keeping track of products is key to meeting customer demand and keeping costs in check.
The advent of technology revolutionized stock control, making it more efficient and accurate. The introduction of barcode scanning and radio-frequency identification (RFID) tags allowed businesses to track inventory levels in real time, significantly reducing errors and improving stock management. These technological advancements enabled companies to maintain optimal inventory levels, ensuring that products were available when needed without overstocking.
Today, things have only gotten more complex. With the boom in e-commerce and global supply chains, companies are now juggling inventory across websites, stores, warehouses—you name it. That’s why modern stock control leans on advanced software to manage the chaos and keep everything running smoothly.
Why is Stock Control Important?
Stock control is an essential aspect of any business that handles a physical product because of the importance of meeting consumer demand. In the retail supply chain industry, suppliers must have enough products readily available to sell to their retailer partners. In the other hand, it is equally essential that businesses of all kinds not hold onto too much excess stock, which increases unnecessary holding costs.
In theory, stock control seems fairly simple. However, there are some variables affecting stock control that suppliers may not be able to control. Some of these variables include:
Bad weather
Economic downturns
Union activity
All businesses share the idea that increasing profitability is the ultimate goal. By maintaining proper stock control, a supplier can minimize costs and increase profitability with each sale. Ultimately, it can be the difference between significant profits or losses.
Related Reading: Demand Sensing in the Walmart Supply Chain
Inventory Control vs. Inventory Management
While inventory control and inventory management are often used interchangeably, they refer to different aspects of handling in-stocks. Inventory control focuses specifically on managing inventory levels to meet customer demand and minimize costs. It involves monitoring stock levels, tracking inventory movements, and ensuring that the right amount of stock is available at the right time.
On the other hand, inventory management encompasses a broader range of activities. It includes procurement, storage, and distribution of inventory, as well as inventory control. Inventory management involves planning and coordinating the entire supply chain process to ensure that products are available when and where they are needed.
What are the Methods of Stock Control?
There are a few different methods of stock control for a supplier’s business.
Just-in-Time (JIT)
Just-in-time, or JIT, stock control helps to minimize the quantity in a supplier’s warehouse. The concept of JIT works to match the stock levels precisely to production levels or general customer fulfillment.
Pros of just-in-time | Cons of just-in-time |
Minimizes warehouse space | Creates more vulnerability to supply shocks |
Reduces waste | Increases risk in price shocks |
Smaller investment needed | Very complex system |
First-In, First-Out (FIFO)
First-in, first-out, or FIFO, stock control handles inventory precisely as the name explains. An example of inventory control using FIFO is in grocery stores, where older stock is sold first to prevent spoilage. The first inventory that comes in will be the first product that leaves the shelves. This method helps to avoid dead stock inventory in the warehouse.
Pros of FIFO | Cons of FIFO |
More realistic inventory system | May not have the most accurate cost depiction |
Minimizes the risk of dead stock or spoilage | Higher taxes for valuation |
Beneficial for forecasting | Decreases cash flow |
Economic Order Quantity (EOQ)
Economic order quantity, or EOQ, works to find the proper amount of inventory a business should aim to purchase to minimize total inventory costs.
Pros of EOQ | Cons of EOQ |
Minimizes holding costs | Involves constant monitoring |
Reduces operational costs | Issues with immediate availability of supplier product |
Generally, a better stock control system | Impossible to accurately forecast demand |
Vendor Managed Inventory (VMI)
Vendor managed inventory, or VMI, involves suppliers taking care of a retailer’s stock.
Pros of VMI | Cons of VMI |
Anticipates customer inventory needs | Requires giving up some level of control |
Improved forecasting for production and transportation | Must partner with an experienced supplier |
Reduction in inventory without sacrificing service | The customer would ultimately feel the effects of supplier inefficiencies |
Related Reading: What is Vendor Managed Inventory (VMI)?
Batch Control
Batch control requires the separation of a supplier’s stock management into different batches. This system can help companies reduce some of the complexities of stock control.
Pros of batch control | Cons of batch control |
Minimizes complexities of stock control | Creates idle downtime during batch testing |
Meets short-term production targets | Increased storage costs for larger batches |
Reduces costs by requiring raw materials only | Minimal job variety for employees |
Related Reading: What Is Aggregate Inventory Management?
How to Implement Stock Control
Since it is vital to have enough stock to meet customer demand, implementing a proper stock control system is essential for any business handling physical products. To implement stock control, follow these simple steps.
Review Current Stock Levels
Reviewing current stock levels is the first step in implementing stock control within a supplier’s supply chain. To effectively check current levels, follow these steps:
1. Count your current stock levels
Counting current stock levels allows the supplier to look at value as well. The supplier can track this individually or use stock control software.
2. Review sales records
Taking a look at sales records will help the supplier identify good sellers from the bad ones. Suppliers will want to look at the big picture and get an idea of seasonal inventory movements.
3. Find the products with the largest gross margin
Suppliers can find the gross margin in the percentage of sales revenue after removing direct costs. By reviewing current stock and finding the products with the highest gross margin, suppliers can focus on these items to improve profits.
4. Identify the slow-moving products
As suppliers go through current stock, they should identify the slow-moving products and figure out a plan to eliminate them. Suppliers should remember that even if they sell the slow-moving products for less than their cost, that is still a better idea than hanging onto the dead stock.
5. Consider donating
Suppliers may want to consider donating to a charity if they’re unsure what to do with dead stock or slow-moving products. If a supplier decides to donate, the supplier should let its customers know it is giving back.
6. Update stock records
Suppliers need to ensure everything in the stock records is up to date and create a policy to track all product movement.
Establish a Stock Control Policy
Suppliers should then figure out which stock control method to implement and stick with it. Suppliers need to ensure inventory levels are appropriate based on the chosen system and continue to replenish as needed.
Identify Areas Impacted by Stock Control
While looking at stock control and working to implement a system, there are other areas of the business to keep in mind, including:
Improving delivery schedules
Marketing and promo impacts
Back-up plan for excess stock
Sales policies
Customer delivery process
Calculate Stock Turnover Rate
The stock turnover rate is the calculation used to check the effectiveness of stock control. A low stock turnover rate tells suppliers that they are not moving the product quickly enough, which yields increased holding costs. A high stock turnover rate could identify areas to fulfill stock to meet customer demand better.
How to calculate stock turnover rate
To calculate your stock turnover rate, suppliers will need to know the cost of goods sold (COGS) and stock on hand.
Once you have both of those numbers, use this formula:
The stock turnover rate measures how many times inventory is sold and replaced over a period.
Stock control is an essential part of any business that handles physical products. If you do not currently have a stock control method in place, consider implementing one as soon as possible.
If you have a stock control method that you currently use, it is never a bad idea to look at it to see if it is still useful and if there are alternative options that might be better fitting to your business.
Protect Your Revenue
Deductions and compliance fines are commonplace when selling to any retailer. SupplyPike helps CPG suppliers get paid and get better. Our software tests the validity of deductions, collects proof documentation, and takes disputing a claim down to a few (or zero) clicks.
Our software also helps suppliers avoid fines by digging into root cause analysis and providing executive-level oversight of the supply chain. Schedule a meeting with a team member to find out if SupplyPike is right for your retail business.
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