Stock is where cash quietly leaves the building
One of the most targeted aspects in any business is inventory. Very often, a lack of proper inventory policies and procedures can lead to massive stock losses which equally translates to more cash out the door.
In so much as we would like to believe that people are trustworthy and handshakes still mean something, the reality in business is quite the opposite. To ensure proper control of your inventory, you need to implement appropriate policies and procedures, train your staff, and monitor them.
At a high level, inventory management falls into 7 main areas that need to be controlled through appropriate policies and procedures. These are not always possible to segregate, based on limited staff, but appropriate controls can be put in place where staff do more than one function.
Scale the control to the size of the organisation and the number of staff. The seven areas stay. How formal each one is, and how often you stocktake, should fit the team you actually have — not a textbook warehouse.
Procurement
Proper procurement of inventory (raw materials or finished goods) can lead to lower inventory holdings and storage space required, reduce the possibility of expired stock, lower the risk of supplier collusion and ensure the lowest price is obtained for the goods purchased.
Receipting
It is good practice to have a dedicated goods receiving bay which is access controlled. Staff may only receive orders that are on system (or approved printed purchase orders) for that day, and the goods being received are to be checked to the:
- Purchase Order — quantities, dimensional or weight checks must be checked to the purchase order, and any additional stock is to be returned to the supplier
- Supplier delivery note — any discrepancies must be documented and signed against
- Quality standards — must be checked if needed
Once the receipting is concluded and the receiving bay is closed, stock is to be handed over to a storeman and signed for. Uncontrolled receiving can result in stock signed for that has not been delivered (theft through collusion), supplier short delivering (fewer quantities than ordered, underweight stock), expired stock and others.
Storage
The receiving storeman is to inspect and count the goods being received against the goods received note and then sign for them. The stock is to be appropriately stored and must be rotated according to expiry dates or other appropriate storage methods. The storeman is to ensure that stock is placed under lock and key and remains fully accountable for any shortfalls.
Issuing
The storeman is to only issue stock upon receipt of a valid stock requisition form / picking slip and to ensure that the stock is signed for by the staff member receiving it.
Production
Should your company manufacture goods, it is important to ensure that wastage and theft is reduced by appropriate planning and training of staff and handovers. This could entail making sure that the raw materials are appropriately utilized in order to minimize wastage, supplying staff with the necessary tools and consumables, or ensuring that machinery is in good working order to avoid breakdowns. Depending on the size of your production facility, there should be handover points between the various sections to ensure accountability of manufactured goods. Finished goods must be stored correctly in order to minimize expiration and theft.
Transportation
Drivers / loaders must be in receipt of valid delivery notes prior to any goods being issued. The storeman in charge of finished goods may only issue on receipt of a valid delivery note from the driver / loader, of which a copy is to be kept by the storeman. The driver is then to obtain the customer signature and name once delivered.
Stocktakes
To ensure the process and procedures are working correctly, a stock take is done to assess the accuracy and to determine possible areas for stock theft and / or wastage.
CompassPoint can put these stock management and control processes in place so that holdings stay lower and theft is reduced. The CFO work then sits on numbers that match what is actually on the floor.
If you need assistance reviewing your company’s inventory processes and procedures, get in touch.