Stock Control (Retail)

 Stock control is necessary if the retailer is to offer customers a balanced assortment. A system need not be elaborate. It should enable the retailer to determine what needs to be ordered on the basis of: (1) what is on hand, (2) what is on order, and (3) what has been sold.

The kind and amount of paperwork necessary for effective stock control depends largely on the type of merchandise. This Guide emphasizes unit control. Unit control provides information about; breadth of assortment, depth of assortment, number of brands stocked, and quality of line stocked.

Maintaining effective control over stock is important in all kinds and sizes of retail operations, but it can be critical in a small one. At best, the owner-manager of a small retail store flirts with loss when stock becomes unbalanced.

The type of merchandise you handle will largely determine the kind and amount of paperwork needed for effective stock control. For example, control of perishables - such as in a delicatassen - requires no paperwork. Stocks are controlled visually. Many deliveries - such as milk and bread - are daily, and others are frequent. In addition, the supplier's routepeople have a self-interest in helping keep stocks fresh.

But even so, the owner-manager may need some sort of reminder - perhaps a note on the calendar - to make periodic checks. The important thing is to watch for changing customer demands requiring changes in your purchases.

The situation is different, though, with parts inventory in a service operation and with sizes and styles in an apparel store. For example, the owner-manager of a shop that specializes in motor tune-up may keep track of the parts used every day with little effort. But what about those used only once a month? Some sort of record is necessary if the right parts are to be on hand when needed.

The owner-manager of almost any store can sketch the basic picture of stock control. It involves four facts: (1) what you have on hand, (2) what you have on order, (3) what you have sold, and (4) what you need to order.

Stock control records help prevent memory lapses. They estimate the need for carrying details - especially on style, colors and sizes - in one's head, a trying task. They provide a container into which the owner-manager can deposit details.

A model stock list is the first step in setting up a replenishment system for merchandise that involves styles, colors and sizes. You prepare a list of all the items you want to control.

The list should include "model stock" quantities. These quantities are the amounts needed in order to maintain an "in stock" position for a certain period - usually a number of weeks.

You can use a simple formula to determine the period of time to be covered by the model quantity. It is: Reorder Period + Delivery Period = Number of weeks.

Suppose that you order shirts every 6 weeks and delivery from the vendor takes 2 weeks, your number of weeks to be covered would be 8 (reorder period of 6 weeks + delivery period of 2 weeks = 8 weeks). Suppose further that you sell an average of 10 shirts a week. In this example, you would need 80 (10 x 8 weeks) to maintain the stock of shirts.

When size is a factor, as in shirts, the necessary size run should be noted on the model stock list. You know from experience which sizes of an item are best sellers, which are medium sellers, and which are low sellers. Best selling colors can also be noted.

Some model stock lists - women's clothing, for example, - include a special section. This section is called maintained selection items. Its purpose is to flag items that change with the fashion.

The term, "maintained selection items," implies groups of items which can be substituted for each other. Girls' blouses provide an example. When they reach the reorder point, you may need to order a new style to replace the old style. Examples of the selection item groups are infants' wear, and children's wearing apparel.

Counting is the basis for getting the information necessary for effective control. You can count stock on a periodic basis or you can count it daily by counting sales.

Your situation may lend itself to counting the stock on a periodic basis. If so, you would use what is called "the rotated method" and record the information on cards.

In the rotated method of stock control, you use rotated unit control cards. The format varies according to the kind of merchandise, but the kind of information is the same. With such a card, you keep track of an item, such as shoes by listing: (1) what is on hand, (2) what is ordered, (3) what has been received, and (4) what has been sold. Once every 2 weeks, the stock is counted to determine how well an item is selling.

If sales are dragging, you may decide to close out the item. If sales are normal, you would order fill-ins. On the other hand, the stock count and other information on the card may reveal that sales are greater than activity on the sales floor has indicated. If so, your decision may be to increase the filling order and plan to promote the item.

The other method for controlling stock is the perpetual method. In it, stocks are calculated from the store's recorded sales.

If you use this method, you have to keep track of sales when they are made, on an item basis. Its usefulness depends on whether the device you use captures the information with a minimum of effort and chance for error. The owner-manager with a fairly large sales volume should check the possibility of using a computer service center to count sales and create up-to-date stock records. Such data processing may be more economical than maintaining the records manually.

Even when electronic data processing is not used, cash register tape may be such a device for capturing the needed information. If a sales count is needed on only a few items, you could check the possibility of using your register to get the information. For example, "Key A" might stand for one item number, "B" for another, and so on.

Sales slips provide another device for recording the item sales. Still another is the price ticket which can be detached when the item is sold.

Whether the information comes from register tape, sales slips, or price tickets, it has to be related to your stocks, specifically to particular classes of merchandise. A drug store, for example, needs sales information on prescriptions, proprietaries, fountain, sundries, tobacco, confections, magazines, and toiletries. The best way is to summarize the information and post it daily to your stock records.

These up-to-date stock records provide the information you need for ordering fill-ins. You review them on a periodic basis - once every 2 weeks, for example - and reorder as needed. One disadvantage is that errors can creep into the posting of the daily sales. However, adjustments can be made through a physical count of stocks every so often.

If you have only one or two items that need unit control, you might want to work with price tickets. At the time of the sale, detach the ticket and file it for later posting on your record. The balance on hand after the posting will determine what you need to reorder.

In a small store, preventing excess stock serves two purposes. One is the maintenance of a balanced assortment which allows the store to serve customers. The other is the assurance that an excessive amount of working capital is not tied up in merchandise.

Open-to-buy is the key to keeping stocks in line. Open-to-buy is the amount of merchandise (in units or dollars) that you need to receive into stock during a certain period.

The period may be the selling season that is customary for a certain line of merchandise. Or it may be a time-span that is set by the owner-manager to fit his or her particular situation.

At the start of the period, a merchandise classification - such as blouses - is open to receive the number of blouses that is necessary to achieve the sales you expect to have in that period. Suppose, for example, that you expect to sell 200 blouses. To start the season, you buy and receive 160 blouses. Thus you are open to buy an additional 40 blouses.

The 40 is your control figure when your order fill-in stock. As long as you buy no more that 40 during the season, your investment in inventory for blouses will be no greater that you had planned.

But what happens if customers make a run on the blouses? If sales activity is tremendous early in the season and you can get a new stock within the next several weeks, the question is a merchandising one. How hot is the hot item? Repeat if halfway? Or is it a freak situation that will have cooled off before new stocks can be received and promoted?

After you have decided how heavily to restock the item, you set a new open-to-buy figure. Living within it keeps your inventory investment within your plans and prevents an excessive stock which might have to be marked down at the end of the season.