What is Stock management : stock management

 Stock management system:

Stock management system comprises a very large part of business Working capital and finance and therefore it is very important to control and manage it efficiently and effectively. Just like the motive of holding money the reason for holding stock is as follows

Transactionary motive;

Thus, this motive of holding stock management system is to meet the demand for holding stock item, where by the size of demand is known with certain or repleshment if stock is immediate when stock out occur.

Precautionary motive;

The precautionary motive of holding stock management system is either or both the demand for the stock item ,or the re supply "lead time" is uncertain because it varies between one occasion and the next. To aviod customer dissatisfaction and lost if sales "buffer stocks" or safety stocks may be held to reduce the like hood that the stock company will run out of supply.

Speculative motive;

The speculative motive of holding stock management system is that  a decision may be taken to increase current stocks in anticipation of the price rise, so as to make a speculative stock holding is administrative . There is clear need to ensure that limits to s firm financial risks in speculative stock management system holding are establish and observed.

Factors influencing stock management holding decision

The factors influencing stock management decisions are as follows;

1. Amount of cash available

2. The storage space available

3. Delivery delays

4. Risk if stock losses (wastage, obsolenset)

5. Minimum ordering quantities imposed by the supplier

6. The storage cost (insurance, interest on capital,etc)

7. Purchase cost(clerical, transportation etc)

8. Required services level to workers or customers.

Stock or inventory control system;

The following are the stock control system and each will be discussed in turn;

1. Periodic review stock management system
2. Re order level stock management system
3. Perpetual inventory/continuous stick taking
4. ABC principles or selective approach
5. Economic order quantity (EOQ) 

Periodic review stock management system;

Under this system, purchase orders are place at

Fixed intervals of time and the quantities to be ordered on any occasion will be decided by reviewing the major trends of demand for or usage of the item concerned.

Re order level stock management system;

This system involve deciding a level of stock holding at which new purchase order should be place . If stock falls to the re oder level , an order will be placed for fixed quantities of the stock. However, the order quantity must have been decided having regard to the normal delivery period ,the rate if usage of stock , variation in delivery time and moment and the minimum level of stock.

Perpetual inventory system/ continuous stock taking;

The perpetual inventory stock management stock system refers to a suituation where by after each issue or receipt the physical balance is calculated. The total of the balance represent the stick on hand , thus making for the avoidance of whole sale periodic stock taking. However , the continuous stock taking may be adopted,and it is that which allows for the comparison or check mating of the actual stock against what is maintained in the stock records on a continuous level.

ABC approach or selective approach;

Under this stock management system, control of stock is mainly by classification or material or items into inexpensive, expensive or a middle cost range because of the advantages of simplifying stores procedures without incurring unnecessary high cost.

Economic order quantity;

Inventory control can be refer to as the stock system used in a firm to cont Irol the firm capital outlay on stock. This , typically involves the recording and monitoring of stocks management level, forecasting future demand and deciding when and how many units to order.

However, the main objective is to minimize,in total ,the cost associated which are here by categories into three groups which are as follows;

1. Carrying cost
2. Ordering cost
3. Stock out cost

Assumptions underlying the operation of the EOQ model;

1. There is a known constant holding or carrying of stock
2. There is a in own constant stock ordering cost
3. There is a known constant stock price per unit
4. The rate of demand are known 
5. The replenishment of stock is made instantaneously. 

Also read: FUNCTIONS OF FINANCE

Types of stock;

1. Components and raw materials; This stock involves the raw materials that will be use for the business
2. Production in progress; this deals with the goods that are under production
3. Final goods : this are the finish products ready for the finance market
4. Consumabl stock ; this are stock use by the business firm for more growth of the business

Importance of stock management;