Page 80 - 8025 - Controlling and locating stock Learner Guide.docx

ADVANCED

RISK MA
SECTION 5: STOCK CONTROL MEASURES

Specific Outcome:
Apply stock control measures.

Outcome Notes:
Apply stock control measures (e.g. periodic stock audit results reports) and corrective action upon
identification of stock discrepancies (in quantity type and quality).

Assessment Criteria

 Stock control measures are explained according organisational procedures.
 Stock control measures are applied to identify stock discrepancies and minimise losses.

 Stock control measures are assessed, and possible improvements recommended in order to
meet legislative requirements and organisational policies.

Measures to Control Stock

Managing stock effectively is important for any business, because without enough stock, production
and sales will grind to a halt. Stock control involves careful planning to ensure that the business has
sufficient stock of the right quality available at the right time.

Stock can mean different things and depends on the industry the firm operates in. It includes:
 Raw materials and components from suppliers

 Work in progress or part finished goods made within the business

 Finished goods ready to dispatch to customers
 Consumables and materials used by service businesses

In order to meet customer orders, product has to be available from stock – although some firms are
able to arrange deliveries Just in Time, see below. If a business does not have the necessary stock to
meet orders, this can lead to a loss of sales and a damaged business reputation. This is sometimes
called a ‘stock-out’.

It is important therefore that a business either holds sufficient stocks to meet actual and anticipated
orders or can get stocks quickly enough to meet those orders. For a high street retailer, in practice
this means having product on the shelves.

However, there are many costs of holding stock, so a business does not wish to hold too much stock
either.

The costs of holding stock include:
 The opportunity cost of working capital tied up in stock that could have been used for
another purpose

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