Improve Your Business: Basics (ILO, 1999, 188 p.) STOCK CONTROL (introduction...) Control your stock Stock records Stock-taking Review Summary What did you learn in this chapter?

Improve Your Business: Basics (ILO, 1999, 188 p.)

STOCK CONTROL

IN THIS CHAPTER YOU WILL LEARN HOW TO

Control stock to improve your business
Arrange and display your stock to its best advantage
Decide whether stock records are important to your business
Keep stock records in a manner that improves your business

NOTE	Since this book is intended for use in many different countries, we have used the term “NU” in the examples to represent an imaginary “National Unit of currency”

Control your stock

WHAT IS STOCK?

Stock means all the products your business has for sale. Stock is also all the raw materials or parts your business keeps and uses to make products or provide services. Different types of businesses have different types of stock. Here are some examples:

RETAILER Stock is the goods and materials a business buys from other businesses and keeps to resell.	MANUFACTURER Stock is the raw materials and parts a business uses to make into products for sale. The finished products for sale are also stock.	SERVICE OPERATOR Stock is the materials or products a business keeps and uses to provide a service.
Figure	Figure	Figure
The stock of this general store includes bread, salt, sugar, soft drinks and flour.	The stock of this tailoring business includes fabric, thread, buttons, zippers and finished garments.	The stock of this shoe repairer includes soles, glue, nails, thread and leather.

WHAT IS STOCK CONTROL?

Stock control means organizing the way you:

Receive your stock
Count and check the condition of goods or materials you receive against the invoice or delivery note.

Record your stock
Write down all goods or materials coming into or going out of your business.

Store your stock
Keep the right amount of stock in a safe and practical way.

Arrange your stock
Arrange your stock so that it attracts customers to buy and also makes it easy for you to see and count.

Check your stock
Check and count your stock often to make sure that it is in good condition and that no stock is missing.

Re-order your stock
Re-order the right stock, in the right quantity at the right time.

Figure

The MARKETING chapter tells you how to find out what products or services your customers want. The BUYING chapter shows you how to improve the way you buy goods or materials for your business.

HOW CAN STOCK CONTROL IMPROVE YOUR BUSINESS?

Good stock control helps you to:

· keep the right goods and materials
· keep the right amount of stock - not too much or too little
· keep your stock in good condition
· prevent stock from being lost or stolen
· re-order stock at the right time.

GUIDELINES FOR BETTER STOCK CONTROL

Keep the right amount of stock

TOO LITTLE STOCK Tasty Bread do not control their stock. They often buy stock too late. This is what happens:	TOO MUCH STOCK OB General Store do not control their stock. Sometimes they order too much. This is what happens:
Figure	Figure
Tasty Bread have to stop production because they do not have any flour in stock. They will lose customers, and sales and profit will go down.	It is summer and OB General Store have more blankets than they need. The business money is tied up. There is not enough money to order other goods that customers want.

There can be many different reasons for running out of stock or keeping too much stock. For example:

· You do not know which goods sell well, and which sell badly. As a result, you may keep ordering the wrong goods or materials.

· You do not check your stock regularly, so you do not know how much stock you have. As a result, you may order too late or too early.

· Your stock is badly arranged, so it is difficult to see and count. As a result, you may order the wrong quantities and you may order at the wrong time.

Always think of what your customers want. Make sure that you do not run out of stock. But keep as little stock as possible. Little stock means less money tied up in stock and more money for your business to:

· spend on goods that customers want, or
· save and earn interest on.

Does your business often run out of stock? Does it hold too much stock of any goods or materials? Do you know why?

Stock goods that sell quickly

· Buy or use stock that sells quickly.
· Stock that sells quickly means more sales and more money coming into your business.
· Avoid having stock that sells slowly. Stock that sells slowly ties up your business money.
· Offer stock that does not sell quickly at a discount if customers do not buy it at its regular price.

Does your business have any stock that does not sell quickly? What do you do with such stock?

Arrange and display your stock well

· Arrange and display your goods neatly, so it is easy for customers to see and easy for you to check and count.

· Keep similar goods or materials in groups near each other.

· Keep small items such as screws and nails in small boxes - one box for each type and size.

· Goods and materials that are attractive to steal should be kept in safe places, for example, near the counter.

· Sell or use the stock you already have, for example perishables, before taking more from a new delivery. When stock is kept too long in your store it may become too old to sell or use. Your customers will complain and your business will lose money. You can put new stock at the back of the shelf so that the old stock at the front of the shelf sells first.

Figure

How do you arrange your stock? Is it well arranged?

The MARKETING chapter shows you how to display your goods to increase your sales.

Check your stock regularly

· Always check that you have the amount of goods or raw materials you need.

· Check to find out if any stock is missing.

· Check for damaged stock or stock that is not in good condition. Try to sell such stock at a discount or use it up before it gets too old.

· Check your stock to find out when to order more and what quantities to order.

Do you check your stock often? Do you often have stock in bad condition? What do you do with such stock?

Keep stock records

· If your business has many goods or materials, use stock records.

· If your business sells fewer goods or materials, you may want to keep stock records only for expensive goods or materials.

· Use your stock records to see which goods sell well and which sell badly. This helps you to know what goods or materials to buy.

· Use your stock records to find out what stock to re-order, when to order and what quantities you need.

Does your business keep written stock records?

Stock records

Keeping stock records means writing down:

· all stock that comes into your business, and
· all stock that goes out of your business.

ARE STOCK RECORDS USEFUL FOR EVERY BUSINESS?

MANY BUSINESSES FIND STOCK RECORDS USEFUL
The General Store sell many different goods. Stock records help them to find out which goods sell well, when to order and if goods go missing.	Reliable Tailors use different fabrics for making garments. Their stock records tell them how much of each fabric they use.
Figure	Figure

SOME BUSINESSES FIND STOCK RECORDS LESS USEFUL
It is easy to check the few products The Corner Shop sell. When they look at their shelves they can see what they need to order.	Beauty Hair Salon only use shampoo, perm lotion and a few other chemicals. It is easy to check and re-order without stock records.
Figure	Figure

Stock records are most useful for businesses which:

· sell or use many different products or materials
· sell or use a lot of each product or material
· have products or materials that are expensive and attractive to steal.

You may find that it is not practical to keep stock records for all the goods or materials in your business. But it may be very useful to keep stock records for some of your goods or materials, for example, the ones that are expensive or attractive to steal.

Stock records are useful because they tell you:

· what goods or materials you have sold or used
· how much of the goods or materials you have sold or used
· when the goods or materials were sold or used
· how much of the goods or materials you have in stock.

Retailers and wholesalers keep stock records for the goods they buy to resell. Manufacturers keep stock records for raw materials. They also keep stock records for finished products.

You can use the information on the stock records to find out:

· what stock sells fast
· what stock to re-order
· when to re-order
· how much to re-order
· if any stock is missing.

USING STOCK RECORDS

When you make your own stock records:

· You can use cards, a hardcover book, an exercise book, loose pages in a file, or anything else that suits your business.

· You can use a separate card, or page, for each product or material.

· You can use a pencil for writing the cost per item, selling price and re-order level on your stock records. Then you can easily change the amounts when the costs, the prices or your re-order levels change.

Figure

Make sure that you keep your stock records correct and up to date. A record which is not up to date gives you incorrect information and you may make wrong decisions in your business.

How to keep stock records

To keep records of all stock, The General Store write down the information on stock cards. They use one card for each product they sell. Here is their stock card for Best Foods cooking oil in 750 ml bottles:

Figure

Stock comes into and goes out of a business in different ways. For example:

Stock comes into your business when: · you receive an order of goods or materials · you accept goods back from a customer and the goods can be sold again · you finish making a product, ready for sale. Write this under Stock In.

Stock goes out of your business when: · you sell goods or materials, for cash or on credit · you use up materials to make products or provide services · you throw away goods or materials that are broken or spoilt in any other way · goods or materials are stolen. Write this under Stock Out.

Re-order levels

The re-order level is the number of units you estimate you need until new stock is delivered. When your stock falls to the re-order level, it is time to order more.

To work out the re-order level, you need to know or estimate:

· how long it takes between ordering and receiving or collecting the new stock
· how much you expect to sell or use while you wait for the new stock
· how much extra stock you may need, for example if:

- you sell more goods or use more materials than you estimated
- the delivery is late
- the supplier is out of stock.

The General Store works out the re-order level for 750 ml bottles of cooking oil:

· The supplier normally delivers a week after they receive the order.

· The General Store normally sell 10 bottles per week.

· In case people buy more or the delivery is late, The General Store estimates that they need 5 extra bottles.

· The re-order level is: 10 + 5 = 15 bottles. ((1) - See figure below)

Figure

Make sure that you know and write down the re-order levels for the goods or materials that you sell or use a lot of. If your business keeps stock records, write the re-order levels on the stock records.

HOW STOCK RECORDS CAN IMPROVE YOUR BUSINESS

Stock records help you decide what goods to sell

Three months ago, The General Store ordered 30 cans of meat. Their stock card shows that they have only sold 10 cans. The cans have tied up a lot of money. The General Store tries to sell them on special offer. Before The General Store buys goods next time, they will look more closely at their stock cards to find out which goods sell well. Then they will know what goods to order.

Figure

Stock records show you how much to re-order

In the past. The General Store ordered 18 jars of coffee at a time. The stock card shows that they have sold only 2 or 3 jars per week. Coffee is expensive, so a lot of business money is tied up. In future, The General Store will only order 6 jars at a time.	In the past, The General Store ordered 12 cans of fish at a time. The stock card shows that they sold almost all the cans in 4 days. In future, The General Store will order 36 cans at a time.
Figure	Figure

Stock records show you when to re-order

Last week, the supplier had no sugar. But The General Store did not run out of stock. When they work out their re-order levels, they include extra stock to cover for unexpected things such as late deliveries or higher sales than usual. The General Store write the re-order levels on the stock cards. Then they can easily and quickly check to see if it is time to re-order.

Stock records help you to find out if you are losing stock

The General Store write down all the stock in and stock out on their stock cards. The balance shows them how much stock there should be in stock. When they physically count their stock they find out how much stock there really is.

If there is a difference between the stock records and how many they count:

· there may be an error in filling in the stock records, or
· their business has a stock control problem. It is losing stock.

Stock-taking

WHAT IS STOCK-TAKING?

It is important to know exactly:

· what kind of stock you have
· how much stock you have
· what condition your stock is in
· how much your stock is worth.

To find out this information you must actually count, measure or weigh all your stock. Stock-taking is a system of physically counting and writing down all the stock in your business on a stock-taking list.

IS STOCK-TAKING IMPORTANT?

Stock-taking gives you a lot of useful information. For example, when you count your stock you will find out:

· if any stock is damaged or in bad condition
· which goods sell quickly and which sell slowly
· which materials and parts you use a lot of and which you use less of
· when to re-order, if you do not keep stock cards.

Figure

Stock-taking helps you to find out if stock is missing

When you compare the quantities on your stock cards with the quantities on your stock-taking list, you can find out:

· if any stock is missing, and
· how much stock is missing.

Stock-taking helps you to find out if there is a problem of missing stock. The reason for the problem can be error in filling in the stock cards, theft, or something else. The stock-taking list cannot explain why the quantity you really have is lower or higher than the balances on the stock cards. You must work that out yourself.

STEPS TO FOLLOW FOR STOCK-TAKING

STEP 1.	Prepare your stock-taking list
STEP 2.	Count the stock and write down the quantities on the stock-taking list
STEP 3.	Copy information from your stock cards to your stock-taking list
STEP 4.	Compare your stock cards with the stock-taking list
STEP 5.	Write the correct quantities on your stock cards
STEP 6.	Write the cost per item for each product on the stock-taking list
STEP 7.	Calculate the total value in stock of each product and write it on the stock-taking list

Step 1. Prepare your stock-taking list

Make your stock-taking list before you do stock-taking. You can use loose sheets of paper, an exercise book or anything else that suits your business. At the bottom of this page, you can see part of a stock-taking list.

Figure

Step 2. Count the stock and write down the quantities on the stock-taking list

When two people do the stock-taking together, one person calls out the name of the product or material and the amount counted. The other person repeats the name and the amount and writes the information on the stock-taking list. This is a good way to avoid mistakes.

For each product, write down the details and the quantity you count on the stock-taking list. Make sure that you do not forget to count any stock, for example, in the storeroom or other places.

Figure

Step 3. Copy information from your stock cards to your stock-taking list

The balance on the stock card for cooking oil, 750 ml, shows that there should be 15 bottles. Copy the quantity from the stock card, 15 bottles, onto the stock-taking list.

Figure

Make sure that your stock cards are up to date before you copy the quantities onto your stock-taking list. Remember that a stock card which is not up to date gives you incorrect information and you may make wrong decisions in your business.

Step 4. Compare your stock cards with the stock-taking list

Compare the stock-taking list (how much stock you really have) with the balance on the stock cards (how much stock you should have) to get the difference (how much stock is missing). The General Store compare their amounts of Best Foods cooking oil, 750 ml:

12	-	15	=	-3
amount on stock-taking list		balance shown on stock cards		difference

Figure

Stock-taking helps you to find out if there is a problem of missing stock. But the stock-taking list does not explain why the real quantity is higher or lower than the balance on your stock card. You must find out the reasons yourself.

Maybe there are problems with your stock cards. For example:

· Did you forget to write down some new stock you bought?
· Did you forget to write down some items that you sold or used?
· Did you remember to write down damaged or broken stock that you could not sell or use?
· Have you made mistakes in your calculations?

Maybe there are problems with your stock-taking. For example:

· Did you forget to count some stock?
· Did you count correctly?
· Have you made mistakes in your calculations?

Maybe there are problems with theft, for example by your customers, your employees or other people who deal with your business.

Missing stock usually means that there are other, more serious problems in the way you look after and organize your stock. Use the information from your stock-taking to improve the stock control in your business.

Step 5. Write the correct quantities on your stock cards

The stock-taking list shows the correct quantities of stock. It tells how much stock you really have:

Figure

But the stock cards must also be correct:

Figure	Figure
When the stock-taking list shows a smaller quantity than the stock card, write the difference as Stock Out on the stock card. For example, to get the correct balance for Best Foods cooking oil, 750 ml. The General Store write the missing amount, 3 bottles, under Stock Out	When the stock-taking list shows a larger quantity than the stock card, write the difference as Stock In on the stock card. For example, to get the correct balance for Star sugar, 2 kg, The General Store write the difference, 1 bag, under Stock In on the stock card.

Step 6. Write the cost per item for each product on the stock-taking list

The cost per item for a product is the price you paid your supplier for one item of the product. Write the cost per item for each product on the stock-taking list. Make sure that you write the latest price your supplier charged you for a product.

Step 7. Calculate the total value in stock of each product and write it on the stock-taking list

Multiply the quantity from the stock-taking with the cost per item to get the total value. The General Store calculate the total value of their stock of Best Foods cooking oil, 750 ml, like this:

12	X	5.46	=	65.52
quantity		cost per item		total value

Figure

When you add up the total value for each product you get the total value for your whole stock.

USE YOUR STOCK-TAKING TO IMPROVE YOUR BUSINESS

The information you get from your stock-taking can help you to improve your business. Look at problems you find when you do stock-taking and think carefully about how you can solve each problem. Here are some questions to help you think about and improve each part of the stock control in your business.

· Receiving your stock: Do you immediately count and check the condition of new stock against the invoice or delivery note?

· Recording your stock: Do you write down every item that comes into or goes out of your business? Do you keep and use stock records?

· Storing your stock: Do you keep all your stock in a safe and practical way? Do you prevent your stock from being damaged or spoilt by keeping the right amount in the right place?

· Arranging your stock: Do you arrange your stock in a way that attracts customers to buy and also makes it easy for you to see and count?

· Checking your stock: How often do you check and count your stock to make sure that it is in good condition and that no stock is missing?

· Re-ordering your stock: Do you have a system for re-ordering the right stock in the right quantity at the right time?

HOW OFTEN SHOULD YOU DO STOCK-TAKING?

How often your business should do stock-taking depends on many things, for example:

· if you keep stock cards or not
· what quantities of stock you keep
· how many different goods or materials you keep and how much they cost
· how quickly you sell or use your stock
· how good your security is.

Decide what is best for your business.

You may decide to do stock-taking often if you: · do not keep stock records · have large quantities of stock · have many different goods or materials · are not sure if stock is secure · have many people, or new people, working in your business · have problems with missing stock.

You may decide to do stock-taking only occasionally if you: · keep good stock records · have small quantities of stock · have few different goods or materials · have good security · do not have problems of stock going missing, for example, through theft.

Review

Summary

Stock means all the products your business has for sale. Stock is also all the raw materials or parts your business keeps to make products or provide services.

Stock control means organizing the way you:

· receive your stock
· record your stock
· store your stock
· arrange your stock
· check your stock
· re-order your stock.

Some useful guidelines for better stock control are:

· keep the right amount of stock
· stock goods that sell quickly
· arrange and display your stock well
· check your stock regularly
· keep stock records.

To keep stock records means writing down:

· all stock that comes into your business, and
· all stock that goes out of your business.

You can use the information on the stock records to find out:

· what stock sells fast
· what stock to re-order
· when to re-order.
· how much to re-order
· if any stock is missing

Work out the re-order level for your goods. The re-order level is the number of units you estimate that you need until you get new stock. When your stock falls to the re-order level, it is time to order more.

Stock-taking is a system of physically counting and writing down all the stock in your business on a stock-taking list.

Stock-taking helps you to find out:

· if stock is missing and how much is missing
· if any stock is damaged or in bad condition
· which goods sell quickly and which sell slowly
· which materials and parts you use a lot of and which you use less of
· when to re-order, if you do not keep stock cards.

Follow these steps to do stock-taking:

1. Prepare your stock-taking list
2. Count the stock and write down the quantities on the stock-taking list
3. Copy information from your stock cards to your stock-taking list
4. Compare your stock cards with the stock-taking list
5. Write the correct quantities on your stock cards
6. Write the cost per item for each product on the stock-taking list
7. Calculate the total value in stock of each product and write it on the stock-taking list.

What did you learn in this chapter?

Now that you have worked through this chapter, try these practical exercises. The exercises will remind you of what you have learned and help you to improve the stock control in your business.

Compare your answers with the Answers. If you find it difficult to work out an answer, read the relevant part of the manual again. The best way to learn is to finish an exercise before you look at the answers. Check the list of Useful Business Words.

You have learned more about stock control in this chapter. But what you have learned does not help you until you use the new knowledge in the day-to-day running of your business. Remember to do the Action Plan to improve the stock control in your business.

STOCK CONTROL PROBLEMS AT TASTY BREAD The bakery Tasty Bread is popular and sales are good. But the business has stock control problems. Tasty Bread think they are keeping more stock than they need. It ties up the business money and some raw materials go bad. They also suspect that stock goes missing, but they do not know how. To solve the stock problem, Tasty Bread start keeping stock records. They also begin to do stock-taking. They decide to do stock-taking on 30 September 2001, after the business has closed for the day. Tasty Bread follows the steps necessary for stock-taking. 1. Follow the steps for stock-taking and help Tasty Bread to fill in their stock cards and stock-taking list, by using the following information. Tasty Bread normally makes 180 loaves per day. On 30 September, they: · used 65 kg white flour, 1 kg yeast, 1.5 kg sugar and 1 kg fat · bought 250 kg white flour, 10 kg sugar and 15 kg fat · had to throw away 10 kg spoilt fat. During the stock-taking, Tasty Bread counted: · 360 kg white flour, 7 kg yeast, 15.5 kg sugar and 17 kg fat. Tasty Bread also need salt but they do not yet keep a stock card for salt.

TASTY BREAD STOCK CARDS

STOCK CARD
Product: Pride white flour Cost per item: 2.10 NU per kg Selling price: Re-order level: 325 kg
		Stock
Date	Details	In	Out	Balance
28/9	B/f			325
28/9	used		65	260
29/9	used		65	195

STOCK CARD
Product: Sun yeast Cost per item: 3.60 NU per kg Selling price: Re-order level: 10 kg
		Stock
Date	Details	In	Out	Balance
28/9	B/f			8
28/9	used		1	7
29/9	used		1	6

STOCK CARD
Product: Star sugar Cost per item: 3.05 NU per kg Selling price: Re-order level: 15 kg
		Stock
Date	Details	In	Out	Balance
23/9	B/f			9.5
23/9	used		1.5	8.0
23/9	bought	10		18.0
26/9	used		1.5	16.5
27/9	used		1.5	15.0
28/9	used		1.5	13.5
29/9	used		1.5	12.0

STOCK CARD
Product: Standard fat Cost per item: 8.40 NU per kg Selling price: Re-order level: 20 kg
		Stock
Date	Details	In	Out	Balance
25/9	B/f			18
25/9	used		1	17
26/9	used		1	16
27/9	used		1	15
28/9	used		1	14
29/9	used		1	13

TASTY BREAD STOCK-TAKING LIST

2. Look closely at the stock-taking list and the stock cards that you have completed and answer these questions: a. How much fat do Tasty Bread have at the end of the day on 30 September? ____________________________________________________________________ b. Of which two raw materials do Tasty Bread keep more stock than they need? ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ c. Tasty Bread were correct when they suspected that stock went missing. · Which raw materials have stock missing? · How much stock is missing of each raw material? ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ d. For which raw material does the amount counted during stock-taking show a higher quantity than Tasty Bread have on their stock card? ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________

1. Here are Tasty Bread’s completed stock-taking list and stock cards. Figure Figure Figure Figure Figure 2. a. At the end of the day on 30 September, the balance column on the stock card shows that Tasty Bread have 17 kg fat. b. Tasty Bread keep more stock than they need of sugar and fat. By looking at the stock cards for sugar and fat, you can see that compared with how much they use every day, the stock levels are very high all the time. Tasty Bread would have lower stock levels if they lowered their re-order levels for sugar and fat. c. White flour and sugar have missing stock. You find this out by comparing the quantities actually counted and written on the stock-taking list with the balances on the stock cards. There are 20 kg of white flour and 5 kg of sugar missing. d. The amount of yeast counted during stock-taking is a higher quantity than Tasty Bread have on their stock card. There are really 7 kg of yeast in stock. Tasty Bread correct their stock card so that it shows the correct amount, 7 kg.