Stock, Inventory and Warehouse Management
What this domain tests
Stock control techniques, reorder calculations, stock turnover, and the flow of goods through a warehouse from receiving to dispatch.
Classification and control
- ABC analysis (Pareto): A items are roughly the top 70% of value on about 10% of SKUs and get tight control; B and C items get progressively simpler controls.
- VED (Vital, Essential, Desirable) classifies by criticality; FSN (Fast, Slow, Non-moving) by movement.
- Stock types: cycle stock, safety stock, in-transit stock, seasonal stock.
- Reorder level = (maximum usage per day × maximum lead time in days) + safety stock.
- Stock turnover = cost of goods sold ÷ average inventory at cost.
- Issue methods: FIFO (first in, first out) for general goods; FEFO (first expiry, first out) for perishables and pharma.
Warehouse flow
Receiving and GRN → quality check → put-away to a bin location → storage (pallet racking, shelving, bulk floor) → picking (zone, batch or wave) → packing → dispatch. Perpetual inventory means continuous book records verified by periodic physical counts; 5S keeps the floor organised; a WMS tracks bin locations and stock accuracy.
Worked example
Maximum usage is 40 units a day, maximum lead time 8 days, and the store keeps 100 units of safety stock. ROL = (40 × 8) + 100 = 320 + 100 = 420 units. Reasoning: the reorder level must protect against the worst case, so maximum usage and maximum lead time are used - average figures would trigger orders too late.
Traps that cost marks
Using average lead time in a reorder formula; applying FIFO to medicines or fresh food where FEFO is required; confusing stock turnover with profit; forgetting that physical verification is what proves book stock.