Stock Control (Part 1) – Basic College Accounting

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