Inventory, Stock Control and Receiving
This domain covers stock records, receiving, storage, counting and replenishment. The exam tests control procedures and reorder calculations.
Core rules and concepts
- Inventory includes raw materials, work-in-progress and finished goods; in retail, stock is mainly merchandise for sale.
- Reorder point = average daily sales × lead time + safety stock.
- Receiving steps: check purchase order, count and inspect goods, record a goods received note, report damage or short supply, label and store, then update records.
- Use FIFO or FEFO for rotation; keep storage clean, labelled and secure.
- Stock counts compare physical stock with book stock; differences are investigated.
Worked example
A store sells 20 units per day, lead time is 5 days, and safety stock is 50 units. Reorder point = (20 × 5) + 50 = 150 units. Reasoning: 100 units cover normal demand during lead time; 50 units buffer against higher demand or delay. Ordering at 150 prevents stock-out under the stated assumptions. If sales rise to 25 per day, the reorder point becomes 175 unless safety stock changes.
Traps that cost marks
- Receiving goods without a purchase order or approved record.
- Assuming book stock equals physical stock.
- Using FIFO for expiry-dated goods instead of FEFO.
- Ignoring damage, short supply or pilferage at receiving.
Key points
- Reorder point covers lead-time demand plus safety stock.
- Receiving needs verification and documentation.
- FEFO protects dated stock.
- Physical counts must be reconciled to records.
- Storage must be labelled, clean and secure.