Product and Inventory Management
Stock control concepts
Candidates must understand par levels, reorder points, lead time, safety stock, stock rotation (first in, first out), back-bar versus retail stock, stocktake, shrinkage, wastage, product dilution and measuring, and supplier management. Know the difference between periodic and perpetual inventory systems, and how COGS links to pricing.
Traps in questions
A frequent trap is ordering based on last month's sales without considering seasonality or promotions. Another trap is confusing shrinkage (loss from theft, error, damage) with wastage (unavoidable loss in use). Questions may also imply that a lower-priced supplier is always better; check quality, lead time and minimum order quantities. Watch for scenarios where back-bar product is used for retail sale.
Worked example
Weekly colour usage is 40 tubes; lead time is two weeks; safety stock is one week. Reorder point = (40 × 2) + 40 = 120 tubes. Order when stock falls to 120, not when it runs out.
Rule of thumb
Rotate stock first in, first out, record wastage, and review par levels quarterly or after any promotion.