Stock control

1 Overview
2 How much stock should you keep?
3 Stock control systems
4 Control the quality of your stock

1. Overview

Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time and how you keep track of it.

It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock.

Efficient stock control ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.

This guide explains different stock control methods, shows you how to set one up and tells you where to find more information.

2. How much stock should you keep?

Deciding how much stock to keep depends on the size and nature of your business, and the type of stock involved. If you are short of space you may be able to buy stock in bulk and then pay a fee to your supplier to store it.

Keeping little or no stock

Advantages of keeping little or no stock and having it delivered when needed include:

  • efficient and flexible - you only have what you need, when you need it
  • lower storage costs
  • you can keep up to date and develop new products without wasting stock

Disadvantages include:

  • meeting stock needs can become complicated and expensive
  • you might run out of stock if there's a hitch in the system
  • you are dependent on the efficiency of your suppliers

This might suit your business if it's in a fast-moving environment where products develop rapidly, the stock is expensive to buy and store, the items are perishable or replenishing stock is quick and easy.

Keeping lots of stock

Advantages of keeping lots of stock include:

  • easy to manage
  • low management costs
  • you never run out
  • buying in bulk may be cheaper

Disadvantages include:

  • higher storage and insurance costs
  • certain goods might perish
  • stock may become obsolete before it is used
  • your capital is tied up

This might suit your business if sales are difficult to predict (and it is hard to pin down how much stock you need and when), you can store plenty of stock cheaply, the components or materials you buy are unlikely to go through rapid developments or they take a long time to re-order.

3. Stock control systems

Stocktaking involves making an inventory, or list, of stock, and noting its location and value. It's often an annual exercise - a kind of audit to work out the value of the stock.

Codes, including barcodes, can make the whole process much easier but it can still be quite time consuming. Checking stock more frequently - a rolling stocktake - avoids a massive annual exercise, but demands constant attention throughout the year. Radio Frequency Identification (RFID) tagging using hand-held readers can offer a simple and efficient way to maintain a continuous check on inventory.

Any stock control system must enable you to:

  • track stock levels
  • make orders
  • issue stock

The simplest manual system is the stock book, which suits small businesses with few stock items. It enables you to keep a log of stock received and stock issued.

It can be used alongside a simple reorder system. For example, the two-bin system works by having two containers of stock items. When one is empty, it's time to start using the second bin and order more stock to fill up the empty one.

Computer software

Computerised stock control systems run on similar principles to manual ones, but are more flexible and information is easier to retrieve. You can quickly get a stock valuation or find out how well a particular item of stock is moving.

A computerised system is a good option for businesses dealing with many different types of stock.

The system will only be as good as the data put into it. Run a thorough stocktake before it goes 'live' to ensure accurate figures. It's a good idea to run the previous system alongside the new one for a while, giving you a back-up and enabling you to check the new system and sort out any problems.

Choose a system

There are many software systems available. Talk to others in your line of business about the software they use, or contact your trade association for advice.

Make a checklist of your requirements. For example, your needs might include:

  • multiple prices for items
  • prices in different currencies
  • automatic updating, selecting groups of items to update, single-item updating
  • using more than one warehouse
  • ability to adapt to your changing needs
  • quality control and batch tracking
  • integration with other packages
  • multiple users at the same time

4. Control the quality of your stock

Quality control is a vital aspect of stock control - especially as it may affect the safety of customers or the quality of the finished product.

Efficient stock control should incorporate stock tracking and batch tracking. This means being able to trace a particular item backwards or forwards from source to finished product, and identifying the other items in the batch.

Goods should be checked systematically for quality so faults can be identified and the affected batch weeded out. This will allow you to raise any problems with your supplier and demonstrate the safety and quality of your product.

With a good computerised stock control system, this kind of tracking is relatively straightforward. Manual stock control methods can also use codes to systematise tracking and make it easier to trace particular batches.

Radio Frequency Identification (RFID) can be used to store information about a product or component's manufacturing date, to ensure that it is sold or processed in time. The system can also be used to trace faulty products quickly and efficiently.

The British Standards Institution (BSI) has a scheme to certify businesses that have achieved a certain standard of quality management. Achieving the standard is one way of showing customers and regulators that you take quality control seriously.

For more information on managing goods, read our guide on storing goods and materials.

Contact your local Business Gateway office.

Your local office will be able to answer your questions on this or any other business subject. 

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