Inventory Handling
Domain focus
This domain tests stock accuracy and handling rules: stock records, bin locations, receipts and issues, returns, damaged stock, FIFO and FEFO, cycle counting, reorder points and safety stock. The exam expects you to calculate closing stock and investigate variances rather than simply accepting them.
Core rules and concepts
- Stock movement formula: opening stock + receipts − issues + returns = closing book stock. Physical stock must be compared with book stock.
- FIFO means first in, first out; FEFO means first expiry, first out. FEFO is essential for medicines, food and other dated goods.
- Reorder point = average daily demand × lead time + safety stock. Safety stock protects against demand or supply variation.
- ABC analysis prioritises control: A items are high-value or high-risk, B medium, C low. High-value items need tighter counting and security.
- Record every movement with date, quantity, unit, location, reference and signature. Investigate variances immediately.
Worked example
Opening stock is 120 units. Receipts are 80, issues are 95 and customer returns are 5. Closing book stock = 120 + 80 − 95 + 5 = 110 units. A physical count finds 107 units, a variance of −3. The storekeeper checks for unrecorded damage, a wrong unit of issue, or a mis-picked order before adjusting the record. If average daily demand is 10 units, lead time is 4 days and safety stock is 15, the reorder point is 10 × 4 + 15 = 55 units. The reasoning combines stock reconciliation with reorder planning.
Traps that cost marks
Do not forget returns or damaged stock. Do not mix units such as boxes and pieces. Do not use FIFO where expiry dates require FEFO. Do not adjust a variance without investigation and authorisation.
Key points
- Use the stock movement formula to reconcile records.