Types and Quantity of Stock

Simply put, everything you store in your warehouse is part of your stock. Determining how much of each
product you should have on hand depends on numerous factors, including the type of product, the
industry, and the time of year.

There are four main types of stock commonly held in warehouses:

1. Raw materials and components are often ready for use in production, and are commonly sold to end-
users, production centres, and retailers.

2. Works in progress are stock in varying stages of production, often unfinished. Again, these items are
sold to a variety of consumers, including end-users, production centres, and retailers.

3. Finished goods are sold to end-users and retailers.

4. The fourth type of stock consists of consumables, such as fuel, stationery, and perishable items.

How much of each item you stock at any one time depends on quite a few factors, but there are a few
questions you can ask yourself to help make this important decision:

1. Do you anticipate reliable demand for that particular item?

2. Is the price likely to remain steady in the near future?

3. Do the items spoil, rot, or otherwise lose value over time?

4. Are discounts available to you if you buy in bulk?

The answers to these questions can help you figure how to stock certain products.

Best Practices For Controlling Stock Movement

Tracking your stock as it moves throughout your warehouse is commonly called stock control or
inventory control. It is an important aspect of warehouse management, as it ensures order accuracy and
timely completion of open orders. Without effective stock management, you may not have the capital or
the products to continue operation.

There are several stock control methods used in modern warehouses. Some managers rely on one
method alone, while others combine multiple methods. Determining the best approach for you depends
on the type of product you store, along with typical demand.

Par level or minimum stock level ordering

We briefly touched upon par level ordering in our last module. Many warehouse managers find this
method to be one of the most effective ways to track and control stock movement. Managers set a
minimum stock level, reordering when supplies dip below that level. You may opt to automate this
procedure, or have an employee continue to enter reorders by hand.

If you have invested in warehouse management software, you should explore the program to see if you
can tailor it for automatic reordering. This is the best way to guarantee you always have the right
amount of stock, by reducing the risk of human error.
Determining the minimum or par level involves complex calculations called economic order quality, or
EOQ. This formula takes into consideration things like historical trends, current market trends, and
company sales projections to arrive at an optimal stock level.

It also factors in the time it takes for your supplier to restock that particular SKU, and the speed with
which it moves from warehouse floor to dispatch. Since this is a highly complex formula, most managers
opt to allow their software programs to run it for them.

Just in time ordering

Just in time ordering is ideal for expensive SKUs or slow moving products. It may not make financial
sense to have more than a few of a particular item in your warehouse at any given time, especially if the
item is costly, or does not move fast. Rather than automatically reorder when levels dip below a certain
amount, your staff members complete a manual review of stock levels, and reorder exactly when the
item is needed.

For this type of system to work, you need to be confident in your supplier’s ability to deliver without
delay. You also need to be fairly certain that you don’t receive orders that exceed current stock levels to
prevent backorders. Uncommon or off-season items are perfectly suited for just in time ordering.

Manual stock control system

Manual systems are generally not preferred, but they do have their place, especially in smaller
warehouses with only a few SKUs in stock. Each item is still given a code and tracked throughout the
warehouse. Instead of doing so using a computerised system, warehouse staff do this manually.

Some companies have a stock book or stock log, where incoming and outgoing products are logged.
Others use a visual re-order system, such as a two-bin system. There are two containers filled with one
particular SKU. Companies reorder that SKU when one container is empty, filling outgoing orders out of
the second bin.

Most warehouses that rely on manual methods conduct audits on a regular basis, to ensure that
mistakes are minimised. They may also use elaborate codes to describe products, with segments
representing things like the value, the location, and the batch of stock.

Computerized stock control system

Computerised systems are suitable for just about every warehouse, regardless of size. Even smaller ones
benefit from a computer-based system over a manual one, assuming the capital is there to fund the
switch to an electronic system. Computerised systems are preferable because they result in fewer
errors, greater efficiency, and more flexibility. Warehouse managers can use these systems for
everything from inventory tracking to optimising the re-ordering process.

If your company deals with numerous SKUs, a computerised system is the best way to run your
warehouse. While manual stock control systems may work with one or two different SKUs, they can
cause confusion, delay, and errors when used to handle large, multi-SKU orders. These systems often
contain other practical features, such as reordering processes, accounting and invoicing systems, and
even payroll functions.
These systems are also ideal if your warehouse has distinct and separate receiving, picking, and dispatch
areas. Staff members in your receiving department only need to input important information about any
given item once. After this, the rest of your warehouse staff members can quickly and easily learn what
they need to from that item in a clear way, without the need to contact receiving staff.

Consider using Radio frequency identification

Radio frequency identification, or RFID, can be a powerful tool, helping you accurately track SKUs
throughout your warehouse. RFID relies on a small microchip affixed to the product or packaging.
Employees can scan these RFID tags to learn more about any particular package, including its contents,
any expiry dates, and the intended dispatch area.

Use of RIFD in warehouses tends to speed up the picking process while also boosting productivity
warehouse-wide. Receiving and dispatch staff also benefit from the use of this technology. Simply
scanning incoming packages helps warehouse staff quickly identify where it belongs upon receipt.
Dispatch staff can confirm the accuracy of each order by scanning the packaging.

There are many reasons why you should consider RFID over traditional barcode marking, especially in
large or busy warehouses. Scanners can read tags and chips remotely, without the need to be
immediately beside the package. You can also tailor your equipment to read several chips at the same
time, making it possible to double check the accuracy of an entire pallet with one scan. Finally, the
information contained on those chips can be updated, allowing managers and staff to track packages in
real time.