Stock or Inventory control is maintaining accurate records of one of the most valuable assets a business owns.

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 the stock and re-ordering.

Efficient stock control using computer software along with barcodes (or R.F.I.D.) possibly will mean you have the right amount of stock in the right place at the right time.

It ensures that capital is not tied up unnecessarily and protects production when there are problems with the supply chain.

Types of Stock

Everything you use to make your products, provide your services and to run your business is part of your stock.

There are four main types of stock:

•  raw materials and components - ready to use in production
•  work in progress - stocks of unfinished goods
•  finished goods ready for sale
•  consumables - for example, fuel and stationery

The type of stock can influence how much you should keep.

Stock value

You can categorise stock further, according to its value. For example, you could put items into low, medium and high value categories. If you feel your stock levels are limited by capital, this will help you to plan expenditure on new and replacement stock .

Stock Control Methods

There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order.

You may opt for one method or a mixture of two or more if you have various types of stock.

• Minimum stock level - you identify a minimum stock level, and re-order when stock reaches that level. This is known as the Re-order Level (ROL)
• Stock review - you have regular reviews of stock. At every review you place an order to return stocks to a maximum level.
• Just In Time (JIT) - this aims to reduce costs by cutting stock to a minimum - see our guide on how to avoid the problems of overtrading. Items are delivered when they are needed and used immediately. There is a risk of running out of stock, so you need to be confident that your supplier can deliver.

These methods can be used alongside other processes to refine the system.

For example:

• Re-order lead time - allows for the time between placing an order and receiving it
• Economic Order Quantity (EOQ) - a standard formula used to arrive at a balance between holding too much or too little stock. It's quite a complex calculation, so you may find it easier to use stock control software
• Batch control - managing the production of goods in batches. You need to make sure that you have the right number of components to cover your needs until the next batch. If your needs are predictable, you may order a fixed quantity every time, or at a fixed interval - say every week or month. This works a bit like a direct debit arrangement and needs regular monitoring.
• First in, first out - a system to ensure that perishable stock doesn't hang about deteriorating. Stock is identified by date received and moves on to the next stage of production in strict order.