Inventory Management and Stock Control
What the domain covers
Inventory management covers ordering, receiving, storing, counting and controlling stock. The exam tests stock records, reorder levels, safety stock, FIFO and FEFO, shrinkage and reconciliation.
Core rules and concepts
- Stock record: item name, SKU, batch, expiry, quantity in, quantity out and balance.
- Reorder level: expected demand during lead time plus safety stock.
- Safety stock: buffer against late delivery or unexpected demand.
- FIFO: first in, first out for general goods. FEFO: first expiry, first out for food, medicines and cosmetics.
- Stock count: physical count compared with records; differences are investigated, not hidden.
- Shrinkage: loss from theft, damage, expiry, paperwork error or supplier short supply.
Worked example
A shop sells 20 units a day on average. The supplier takes 5 days to deliver. The owner keeps 40 units as safety stock. Reorder level = (20 × 5) + 40 = 140 units. If stock on hand is 120 units, the shop should order now. If it waits until stock reaches zero, it risks a 5-day stockout plus any supplier delay. The order quantity should also consider shelf life and storage space.
Traps that cost marks
Using sales alone and ignoring lead time; treating safety stock as extra sale stock; using FIFO for expiring food instead of FEFO; counting stock without reconciling records; failing to record damaged or expired stock; ordering more than storage or expiry allows.