Understanding Stock Management

Key Principles of Inventory Dynamics

Stock management is a fundamental component of inventory control, governed by principles that guide stock movement and management methodologies.

FIFO (First-In-First-Out)

What it is: The earliest acquired inventory is used first.
Benefits: Maintains accurate inventory valuation, promotes operational efficiency, and financial health by ensuring fresh stock circulation.

LIFO (Last-In-First-Out)

What it is: The most recently added inventory is used first.
Benefits: Can reduce tax liabilities and enhance profitability in rising cost environments but may result in the accumulation of outdated stock.

JIT (Just-In-Time)

What it is: Minimizing inventory by aligning procurement closely with production needs.
Benefits: Frees up capital from being tied in surplus inventory, enhances organizational agility, but demands solid supply chain management to prevent stockouts.

Strategies for Buffering and Proactive Stock Replenishment

Safety Stock

What it is: A backup stock reservoir to manage fluctuations and inconsistencies in supply-demand and logistics.
Role: Defends against service disruptions, enhances brand reliability, and mitigates impact from unexpected supply chain issues.

Reorder Levels

What it is: A pre-determined stock level that triggers reorder actions, considering procurement lead times and usage rates.
Importance: Ensures uninterrupted operations, aligns supply with demand, and maintains product availability, boosting customer satisfaction.