Chapter 24 Stock Handling and Inventory Control • Section 24.1 The Stock Handling Process • Section 24.2 Inventory Control The Stock Handling Process Key Terms receiving record blind check Objectives method Describe the receiving process direct check method • Explain stock handling techniques used in spot check receiving deliveries method quality check method source marking preretailing marking method Marketing Essentials Chapter 24, Section 24.1 The Stock Handling Process Graphic Organizer Copy this flow chart. Use it to identify key steps in the stock handling process. Marketing Essentials Chapter 24, Section 24.1 Stock Handling The steps in stock handling include: • Receiving goods • Checking them • Marking the goods with information • Delivering them to a place to be used, stored, or displayed for sale Marketing Essentials Chapter 24, Section 24.1 Receiving Stock Where stock is placed when it is received depends on the type and size of the business. Smaller companies may just have stock rooms while larger businesses can have bigger areas, loading docks, and even warehouses. Marketing Essentials Chapter 24, Section 24.1 Receiving Stock receiving record Information A receiving record X is recorded information recorded by about goods received either manually or businesses about electronically. Information recorded can include: the goods they receive. • A receiving number • Person who received the shipment • Name of shipper and carrier Marketing Essentials Chapter 24, Section 24.1 Receiving Stock • Place from which the goods were shipped • Number of items delivered and condition • Shipping charges • Department or store that ordered the merchandise • Date the shipment was received Marketing Essentials Chapter 24, Section 24.1 Checking Merchandise Merchandise is checked to verify quantity and condition using these four methods: Blind check Direct check Spot check Quality check Marketing Essentials Chapter 24, Section 24.1 Checking Merchandise blind check method The receiver of a The blind check method X requires the receiver delivery writes the description of to write the merchandise description, count the the merchandise, quantities received, and list them on a blank form. counts the quantities It is the most accurate method but can be very received, and time-consuming. lists them on a blank form or dummy invoice. Marketing Essentials Chapter 24, Section 24.1 Checking Merchandise direct check method The merchandise With the direct check method X, the is checked directly against merchandise is checked directly against the actual the actual invoice invoice or purchase order. This procedure is faster or purchase than the blind check, but errors may not be found order. if the invoice is incorrect. Marketing Essentials Chapter 24, Section 24.1 Checking Merchandise spot check method The receiver of a The spot check method X is a random check of delivery conducts a check of one one carton in a shipment. The other cartons are carton in a assumed to be in the same condition, and this shipment to see method is often used for products such as canned if the right kind goods and paper products. and quantity of goods were delivered. Marketing Essentials Chapter 24, Section 24.1 Checking Merchandise quality check method The merchandise The quality check method X is used to inspect is checked to determine the workmanship and general characteristics of the whether the received merchandise. A buyer often performs this quality of goods check. If the goods are damaged, a damage report received matches is prepared. the quality of the products, which were ordered. Marketing Essentials Chapter 24, Section 24.1 Marking Merchandise source marking The seller or The most common method of marking price is with manufacturer marks the price a Universal Product Code (UPC). UPCs are often before delivering used for source marking X, a method in which the merchandise the manufacturer or seller marks the price before to the retailer; delivering the merchandise to the retailer. the marking often uses a universal product code (UPC). Marketing Essentials Chapter 24, Section 24.1 Transferring Merchandise Transferred merchandise is accompanied by a form describing the: • Items • Style numbers • Colors and sizes • Cost and retail prices Marketing Essentials Chapter 24, Section 24.1 Transferring Merchandise Stock transfers between departments or stores occur when merchandise is carried by one department or retailer but is needed by another. They can also occur when off-season merchandise is moved to surplus or discount stores. Marketing Essentials Chapter 24, Section 24.1 SECTION 24.1 REVIEW SECTION 24.1 REVIEW - click twice to continue - Inventory Control Key Terms inventory inventory management Objectives just-in-time Describe the process for providing effective (JIT) inventory management inventory system Explain the types of inventory control systems perpetual inventory Discuss the relationship between customer system service and distribution physical inventory system cycle counts stockkeeping unit (SKU) dollar control unit control Marketing Essentials Chapter 24, Section 24.2 Inventory Control Key Terms inventory turnover basic stock list Objectives model stock Analyze sales information to determine list inventory turnover never-out list Discuss technology and inventory management real-time inventory systems Marketing Essentials Chapter 24, Section 24.2 Inventory Control Graphic Organizer Copy this concept map and use it to record aspects of perpetual and physical inventory systems. Marketing Essentials Chapter 24, Section 24.2 Inventory Management inventory All the goods stored by a business before Inventory X refers to all the goods stored by a they are sold. business before they are sold. It includes: • Raw materials and packaging materials • Components purchased from suppliers • Manufactured sub-assemblies • Work in progress and finished goods Marketing Essentials Chapter 24, Section 24.2 Inventory Management inventory management The process of Inventory management X is the process of buying and storing materials buying and storing these materials and products and products while controlling costs for ordering, shipping, while controlling handling, and storage. costs for ordering, shipping, handling, and storage. Marketing Essentials Chapter 24, Section 24.2 Distribution, Inventory Management, and Customer Service just-in-time (JIT) inventory system Every department in today’s business environment An inventory system that must be customer oriented. controls the flow A just-in-time (JIT) inventory system X of parts and material into coordinates demand and supply so that suppliers assembly and deliver parts and raw materials just before they manufacturing are needed. plants. Marketing Essentials Chapter 24, Section 24.2 Inventory Systems Two methods of tracking inventory are the: • Perpetual inventory system • Physical inventory system Marketing Essentials Chapter 24, Section 24.2 Perpetual Inventory System perpetual inventory system A perpetual inventory system X tracks the An inventory system that number of items in inventory on a constant basis. tracks the With this system, a business keeps track of sales number of items as they occur. in inventory on a constant basis. In a manual system, employees gather paper records of sales and enter that information. Marketing Essentials Chapter 24, Section 24.2 Physical Inventory System physical inventory system In a physical inventory system X, stock is An inventory system where visually inspected or counted to determine the every so often, quantity on hand. A company uses this system to: stock is visually inspected or • Calculate income tax actually counted • Determine the value of its inventory to determine the quantity on • Identify shortages and plan purchases hand. Marketing Essentials Chapter 24, Section 24.2 Physical Inventory System cycle counts A small portion of the inventory is physically counted The most popular method of inventory each day by stockkeeping units management is physical inventory. Cycle so that the entire counts X allow a business to count a small inventory is portion of the inventory every day to track the accounted for on a entire inventory. A stockkeeping unit (SKU) X, regular basis. a unit or a group of related items, counts it. stockkeeping unit (SKU) A unit or a group of related items in a unit control inventory system; the smallest unit used in inventory control. Marketing Essentials Chapter 24, Section 24.2 Physical Inventory System Visual control is used mainly by smaller businesses. It uses stock cards noting the necessary number of each displayed item. The difference between the number on the card and the actual number of items on hand is the amount that needs to be reordered. Marketing Essentials Chapter 24, Section 24.2 Using Both Systems Most businesses find it effective to use both systems because they complement each other. The perpetual system gives an up-to-date inventory record throughout the year. The physical system gives an accurate count that can be compared to the perpetual records. Marketing Essentials Chapter 24, Section 24.2 Stock Control Stock control involves monitoring stock levels and investments including: • Dollar versus unit control methods • Inventory turnover calculations • Three stock lists: model, basic, never-out Marketing Essentials Chapter 24, Section 24.2 Using Both Systems When the physical count shows less merchandise than is supposed to be in inventory, a stock shortage or shrinkage has occurred, such as: • Employee and customer