Understanding Inventory Management: Concepts and Stock Control
Concept and Need for Stocks
Business enterprises and industries must acquire a series of articles to function normally. These items are either consumed by the company in its manufacturing process or sold directly to customers without further processing.
The Importance of Shelf Availability
In retail, a critical task is ensuring the constant presence of items on the shelf. Studies show that customers often leave a store without purchasing anything if the items they seek are unavailable. Ideally, a company would know exactly what will be consumed or sold daily and receive the precise amount from suppliers to meet that demand. However, this is rarely simple due to several factors:
- Difficulty in accurately predicting customer behavior.
- The need for a specific assortment and quantity of each item.
- Delays in production and transport.
- Potential supply chain disruptions.
- Periodic and repetitive ordering costs.
- Increased administrative work for small, frequent orders.
- Incentives offered by suppliers.
- Limited supplier response capacity.
- Discrepancies between supply rates and consumer demand.
Defining Stock
Because supply rarely matches demand perfectly, companies must store goods. The articles held by a company pending use or sale are called stock or inventory. Warehouse stock enables a company to:
- Accommodate daily sales or consumption requirements.
- Cover consumption or sales during supplier shortages.
- Manage unforeseen or extraordinary changes in demand.
Differences Between Assortment and Stock
The assortment is the set of products a company makes available to its customers, while stock represents the accumulated quantity of each product held in storage waiting to be sold.