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Stock levels according to stock type

Stock of raw materials

Ask yourself a few key questions to help you decide how much inventory you should keep:

How reliable is the supply and are there other sources of supply?

Are the components produced or delivered in batches?

Can you predict demand?

Is the price stable?

Are there any discounts if you buy in bulk?

Inventories of unfinished products

Maintaining stocks of unfinished goods can be a useful way to protect production in the event of problems with other supplies.

Finished products ready for sale

You can keep stocks of finished products when:

  • the demand is certain,
  • the goods are produced in batches,
  • you are placing a large order


The amount of inventory you keep will depend on factors such as:

  • reliability of supply,
  • expectations of price increases,
  • the stability of demand,
  • discounts for bulk purchase

Inventory control methods

There are several methods of inventory control including inventory software for small business, all designed to provide an efficient system for deciding what, when and how much to order.

You can opt for one method or a mixture of two or more depending on your situation and your needs.

Minimum stock level

You identify a minimum stock level and reorder when stock reaches that level. This is called the reordering level.

Inventory review

You have regular stock reviews. With each review, you place an order to bring inventory down to a predetermined level.

Just In Time (JIT)

This aims to reduce costs by reducing inventory to a minimum. Items are delivered when needed and used immediately. There is a risk of out of stock, so you need to be confident through POS system with inventory management that your suppliers can deliver on demand.

These methods can be used alongside other processes to refine the inventory control system. For example:

Replenishment lead time

This takes into account the time between placing an order and receiving it.

Economic quantity (EOQ)

The standard EOQ formula is used to strike a balance between having too much or too little inventory. This is a fairly complex calculation, so you may find it easier to use inventory control software.

Batch control

It is a management of the production of goods in batches. You need to make sure you have the right number of components to cover your needs until the next batch.

If your needs are predictable, you can order a fixed amount of inventory each time you place an order, or order at a fixed interval – say every week or month. This is because you are placing a standing order, so you must keep the quantities and prices under review.

First in, first out (FIFO)

The FIFO system ensures that the stock of perishable goods is used efficiently so that it does not deteriorate. The stock is identified by date of receipt and goes through each stage of production in strict order.

Manual inventory tracking

Stock inventory is the process of making an inventory or list of stocks and noting their location and value with the help of inventory software for small business. This is often an annual exercise – a kind of audit to calculate the value of inventory as part of the accounting process.

Codes, including bar codes, can make the whole process much easier, but it can still be time consuming. Checking equipment more frequently – a rolling inventory – avoids a massive annual exercise, but requires constant attention throughout the year. Radio Frequency Identification (RFID) tagging using handheld readers can provide a simple and effective way to maintain continuous inventory control.


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