Red Seal Parts Technician: Inventory Management and Control (stock levels, counts, cycle counts, reconciliation, shrinkage)

Setting levels

Stock decisions balance service level against carrying cost. Minimum (safety stock) protects against demand spikes and late deliveries; maximum caps investment and shelf space. Reorder point = (average daily usage × lead time in days) + safety stock. Economic order quantity balances ordering cost against holding cost. ABC classification concentrates attention: A items are few, fast-moving and high value, C items are many and slow, and they get looser review. Consider shelf life, seasonality, cores and obsolescence when setting any level.

Counting and reconciliation

Physical counts must be blind where possible, in bin-location order, with a second count for discrepancies. Cycle counting samples a set number of bins per day so the whole inventory is verified without shutting down. Count accuracy = (counts within tolerance ÷ total counts) × 100. Reconciliation compares book quantity to counted quantity, investigates the cause (mis-pick, wrong receipt, unrecorded return, unit-of-measure error) and posts an adjustment with a reason code - never just "plug the number."

Shrinkage

Shrinkage = (book value − physical value) ÷ book value × 100. Causes include theft, damage, mis-shipment, unrecorded scrap, receiving errors and data-entry mistakes. Rotation rules (FIFO/FEFO) and clean bin locations reduce it.

Worked example: usage is 12 units/day, lead time 10 days, safety stock 30 → reorder point = (12 × 10) + 30 = 150 units. If the count is 140, order now.

Traps: confusing minimum with reorder point when lead time is non-zero; forgetting that a committed special order reduces available stock; accepting an adjustment without a reason code.