Inventory is one of the most significant current assets to a company and is available in the form of raw materials, work in progress (unfinished goods) and finished goods. Irrespective of the form they are in, maintaining inventory is costly due to holding costs; thus it should be managed efficiently. The key difference between stocktaking and stock control is that stocktaking is the process of physically verifying the condition and quantities of inventory in an organization whereas stock control is the systematic process of ensuring that sufficient stock levels are maintained by the company in order to meet the customer demand without delays while keeping the stock holding costs to a minimum.
CONTENTS
1. Overview and Key Difference
2. What is Stocktaking
3. What is Stock Control
4. Side by Side Comparison – Stocktaking vs Stock Control
5. Summary
What is Stocktaking?
Stocktaking, also referred to as ‘inventory checking’, is the process of physically verifying the condition and quantities of inventory in an organization. The main objective of stocktaking is to identify possible wastage in advance and plan how to minimize the same. This will allow companies to conduct smooth business operations. The type of stocktaking to be adopted depends on the nature of the business and the nature of the industry as well. For instance, businesses that deal with perishable goods and extremely valuable goods should undertake stocktaking on a much frequent basis.
Types of Stocktaking
Given below are the most widely used types of stocktaking.
Frequency Based Stocktaking
This can be done on a daily or end shift, weekly, monthly, quarterly or annual basis. The frequent stocktaking will be more accurate and assist the company to identify stock related issues; thus daily or end shift and weekly stocktaking are considered to be very accurate. However, stocktaking with short frequencies is very time consuming and costly to conduct. Monthly, quarterly and annual stocktaking usually takes place when preparing monthly, quarterly and annual financial reports.
Line Checks
Line checks may be performed after encountering a problem with a certain product. Line checks are implemented to check stock levels of the respective product in order to overcome the identified problem. This is less time consuming and less costly, however, is less effective since this is a corrective action, not preventive.
End of Lease Valuation
End of lease valuation stocktaking will be performed at the time of liquidating business operation. Stocktaking will be performed by the external auditors to determine the closing value of the inventory.
What is Stock Control?
Stock control is the systematic process of ensuring that sufficient stock levels are maintained by the company in order to meet the customer demand without delays while keeping the stock holding costs to a minimum. When conducted effectively, stock control can minimize cost and improve production efficiency.
How to Ensure an Effective Stock Control System?
Establish an Annual Stock Policy
Defining a minimum and maximum stock level for each inventory category (raw materials, work in progress and finished goods), along with a list of suppliers from whom the company will purchase goods can make stock control effective. Furthermore, sufficient buffer stock (safety stock) should be maintained in order to prevent stock outs.
Inventory Budgeting
An inventory budget will include the cost of acquiring and holding inventory and how much revenue can be generated through the sale of finished goods. This type of budget helps the company to plan inventory effectively.
Maintaining a Perpetual Inventory System
The perpetual inventory system is a method of accounting for the increase or decrease in inventory immediately following a sale or purchase. This system keeps continuous track of inventory balances, thus provides complete details of changes in inventory through immediate reporting. The main advantage of perpetual inventory system is that it demonstrates how much inventory is available at any given point of time and prevents stock outs.
Rigorous Procedures to Select the Most Suitable Suppliers
If the company can spend sufficient time in selecting suppliers by considering a number of alternatives, it will be able to select the most suitable suppliers who will deliver quality goods on time as an when it is required.
What is the difference between Stocktaking and Stock Control?
Stocktaking vs Stock Control |
|
| Stocktaking is the process of physically verifying the condition and quantities of inventory in an organization. | Stock control is the systematic process of ensuring that sufficient stock levels are maintained by the company in order to meet the customer demand without delays while keeping the stock holding costs to a minimum. |
| Main Objective | |
| The main objective of stocktaking is to inspect the condition of the inventory. | The main objective of stock control is to ensure that adequate stocks are available to meet production and sales demands. |
| Frequency | |
| The frequency of stocktaking depends on company policy and can be conducted on a daily, weekly, quarterly or annually. | Stock control should be done on a continuous basis. |
Summary – Stocktaking vs Stock Control
The difference between stocktaking and stock control is that stocktaking is done to ensure that the inventory is in favourable condition while stock control is conducted to ensure that adequate stocks are available to meet production and sales demands. Even though both check different aspects, they share a largely similar objective, which is to ensure that sufficient inventory is issued for production and sales that are in good quality.
Reference:
1. “6 Inventory Control Techniques for Stock Optimization.” EazyStock. N.p., 20 Jan. 2017. Web. 19 May 2017. <http://www.eazystock.com/blog/2015/08/03/6-inventory-control-techniques-for-stock-optimization/>.
2. “Stock control and inventory.” Info-Entrepreneurs. N.p., n.d. Web. 19 May 2017. <http://www.infoentrepreneurs.org/en/guides/stock-control-and-inventory/>.
3. “5 Major Techniques of Stock Taking (Including Merits and Demerits).” World’s Largest Collection of Essays! Published by Experts. N.p., 17 Aug. 2015. Web. 19 May 2017. <http://www.shareyouressays.com/116390/5-major-techniques-of-stock-taking-including-merits-and-demerits>.
Image Courtesy:
1. “X2 warehouse” By CTsabre14 – Own work (CC BY-SA 3.0) via Commons Wikimedia