Managing stock

Businesses need to manage their stock in the most effective and efficient way possible.

Stock can consist of:

  • raw materials waiting to be used in production
  • work in progress
  • finished stock waiting to be delivered

For example, a car manufacturer’s stock could include car parts and components waiting to be fitted (raw materials), partially built cars (work in progress) and completed cars waiting to be delivered to customers (finished stock).

If the stock materials are not managed efficiently, it could mean production has to stop. As a result, the whole factory production line could come to a halt.

Procurement means getting the right supplies from the right supplier. Effective stock control is important to both customers and businesses.

Customers expect to be able to go into a store and buy the products they desire.

Without appropriate stock control, businesses can run out of stock, which loses them sales and potentially customers. However, holding too much stock can also have negative consequences:

  • high storage costs, which may mean the business has to raise its prices
  • increased waste, if the products are perishable, eg fruit and vegetables
  • reduced income, if the business needs to sell off excess stock at a reduced price