Stock Control (Part 1)

August 13th, 2006 Comments off
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Before we move to the types of Stock Control methodology, let’s look at some of the following terms used in Stock Control System.

Terms

Meaning/Definition

Lead or Procurement time

  • In terms of days, weeks, month, etc.
  • Period of time between Ordering whether external or internal to replenishment ie the goods are available for use.

Demand

The amount required by the requestor whether from sales, production, etc

Economic Ordering Quantity

· Short term for EOQ

· Also called Economic Batch Quantity (EBQ)

· In short, it is a calculated ordering quantity which minimize the balance of cost between inventory holding costs and reorder costs.

Physical Stock

Actual number of items physically in stock at a given time.

Free Stock

Physical stock plus outstanding replenishment orders minus unfulfilled requirements

Buffer/Minimum/Safety Stock

A stock allowance to cover errors in forecasting the lead time or the demand during the lead time.

Maximum Stock

The maximum stock level indicator to show when stocks have risen too high.

Reorder Level

The stock level where further replenishment order needs to be placed. Depends on lead time and demand during the lead time

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Financial Accounting

 
 

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