Stocks & Inventory

After being analysing cases in lectures where the different kind of stocks and the bests ways of keeping inventory were involved, I thought that could be interesting to write a post where I’ll review these topics deeply.

As it is well known, the stock is the set of goods or products which belongs to an organization or individual that used them to achieve certain objectives. It results important to have always the necessary quantity, in the moment or place wished in the most economical way that is possible. Furthermore, there exist different kinds of stocks that are classified according to their function or the point of view of its management.

  • Functional stock:

– Safety stock: it consists on having a volume of existences over the quantity which is really needed to face possible fluctuations on demand or unexpected delivery delays.

– Cycle stock: products or goods that supply the common customers demand. This stock is depleted over the time.

– Presentation stock: it is the one visible to customers for serving the most imminent sells.

– Seasonal stock: the aim of this stock is to face the expected sales that take place in a specific season (e.g.: ice cream, sunglasses, etc.).

– Stock in transit: it is going round on the different stages of the productive and commercial process.

– Recovery stock: are products or goods already used that can be reused partially or completely for new ones.

– Dead stock: are those products that can’t be reused so should be discarded.

– Speculative stock: accumulation of stock when it is believed that the demand will increase considerably.

  • Operational Stock:

– Optimum stock: establish a good relation between attend adequately the demand and acquiring maximum profit having in mind the holding costs.

– Zero stock: there is only the stock necessary to supply a specific demand.

– Physic stock: is the quantity of product available on that moment on the warehouse.

– Net stock: is the physic stock removing the unmet demand.

– Available stock: is the physic stock adding the orders in progress to suppliers minus the unmet demand.

Additionally, is essential to maintain a control over the stock that is available and have an inventory where all the products are listed and ordered by categories, the features of each are detailed and the price is specified. Below are shown the different types of inventory:

  • Periodic inventory

The company realize a regular control of the stock after a given period of time. This kind of inventory doesn’t allow the company to have exact information about the inventory problems or shortage.

Consist in request orders with a volume higher than what is really needed due it is cheaper instead of ordering according the demand of that moment. This inventory is useful to minimize the cost of emission of the order and storage of a product.

  • Permanent inventory

The permanent inventory is made by having in mind a factor that is of the company’s interest such as value, marketing, etc. The periodicity is established according the factor considered. This inventory allows the company to know which is the existence or value of the products

In addition, not all the products that are stored have the same value. For that reason, some companies like to use the ABC method which allocate to each product a different degree of control based on its value. As a consequence, the products are classified on three groups. In first place, there is the Group A which is composed by a small number of items but they represent a high percentage of the total value of the stock (60-80%). Group B is composed by a higher number of products with a total value of 30-40% and Group C represents a great amount of items however only the 5-20% of the total value of the stock is related with them. To sum up, products that belong to group C requires a continuous revision and maximum control while others don’t because they are considered less important.

Video about the ABC system (1:07 – 1:29).


To conclude, there exist different kinds of stocks which are managed in different ways  and have different value. For that reason, it results important to really understand all the concepts treated throughout this post to be able of manage in the best way the stock and inventory of a warehouse.

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