Inventory, Stock Control and Supply Chain Basics
Inventory is the stock a retailer holds to meet demand. Stock control keeps the right quantity available while limiting excess and shrinkage. Supply chain basics cover the flow from supplier to store. This domain tests stock records, reorder logic, stock-taking and loss.
Core rules and concepts
- Inventory types include cycle stock, safety stock, seasonal stock and in-transit stock.
- Records: stock ledger, perpetual inventory, periodic stock take, GRN, purchase order and supplier invoice.
- Reorder point (ROP) = average daily sales × lead time + safety stock. It triggers a replenishment order; it is not the order quantity.
- Safety stock covers demand and lead-time uncertainty. EOQ balances ordering and holding costs.
- Shrinkage is stock loss from theft, damage, expiry, supplier short-delivery or record error. ABC analysis focuses tight control on high-value A items.
- Supply chain flow: forecast → purchase order → supplier → transport → receiving → storage → shelf → customer; reverse logistics handles returns.
Worked example
A store sells 20 units per day. Lead time is 5 days; safety stock is 30 units. ROP = (20 × 5) + 30 = 130 units. Reasoning: when stock reaches 130, order more; the 100 units cover normal demand during lead time and 30 cover unexpected demand or delay. If stock is 130 but an order takes 7 days, the ROP should be reviewed, not ignored.
Traps
- Do not confuse reorder point with reorder quantity.
- Stock value and stock units are different measures.
- Shrinkage is not only shoplifting; include damage, expiry and paperwork errors.
- Do not count stock only once a year if the business needs cycle counts.