1. Identify and list the different items you use and produce: raw materials, other consumables, spare parts and your own products.
2. Establish who uses each stock item and who should be responsible for managing it.
3. Focus your stock control efforts on critical items which are most important to your business and must be immediately available.
4. Analyse your usage of each item; note any seasonal variations.
5. Identify the lead time for restocking and other options such as faster delivery for an additional cost or from a local supplier.
6. Set a minimum stock level to cover your requirements over the delivery lead time.
7. Assess the costs of holding stock, including financing, insurance and storage, and the risk of losses through deterioration or obsolescence.
8. Calculate the most cost-effective order size, based on delivery costs, volume discounts, usage requirements and stockholding costs.
9. Plan and organise your storage areas. Take into account environmental requirements (eg temperature and humidity), handling and safety (eg heavy items), accessibility to the most frequently required items and security.
10. Set up systems for receiving and issuing; ensure that perishable stock is properly rotated and the oldest stock is issued first.
11. Decide how you will check stock to determine reorder requirements (eg by counting, weighing or casual inspection) and how often this should happen.
12. Periodically carry out a complete stock check; check items more frequently where you suspect problems (eg theft or excessive wastage).
13. Periodically identify and dispose of excess or obsolete stock: for example, through special offers or simply by scrapping it.
Do's & Don'ts
Do:
Focus your efforts on critical stock items.
Determine minimum stock levels.
Store and handle stock safely and securely.
Rotate stock.
Make periodic stock checks.
Don’t:
Waste time controlling trivial stock items.
Tie up capital and space storing excessive stock.
Hold on to obsolete stock.
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