Inventory, Stock Handling and Storage
This section covers Inventory, Stock Handling and Storage. The exam tests stock records, reorder decisions, receiving, storage conditions and shrinkage control.
Core rules
Inventory includes raw materials, work-in-progress and finished goods; in retail, it is mainly stock for sale. Keep a bin card or stock ledger for each SKU showing receipts, issues and balance. Receive goods with a purchase order and goods received note (GRN), check quantity, quality, MRP, batch and expiry, and report shortfalls or damage immediately.
Reorder level = average daily sales × lead time + safety stock. Safety stock covers demand or delivery uncertainty. FIFO means first in, first out; FEFO means first expiry, first out and is essential for food, medicines and cosmetics. Store according to label conditions: cool, dry, away from sunlight, off the floor, and in cold chain where required. Stack safely and keep pest control records. Shrinkage is stock loss from theft, damage, expiry or error; investigate rather than hide it.
Worked example
A shop sells 20 units per day, delivery takes 7 days, and the owner keeps 50 units as safety stock. Reorder level = 20 × 7 + 50 = 190 units. When the balance reaches 190, place an order; waiting until zero causes stock-outs. The reasoning separates normal lead-time demand (140) from the buffer (50).
Traps
Do not confuse reorder level with economic order quantity. Do not receive stock without a GRN. Do not use FIFO for expiring goods when FEFO is required. Do not store food on the floor or near cleaning chemicals.
Key points
- Maintain SKU-wise bin cards or stock ledgers.
- Receive against a purchase order and GRN.
- Calculate reorder level with lead time and safety stock.
- Use FEFO for expiry-sensitive stock.
- Investigate shrinkage with records, not guesswork.