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What is Stock Management?

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  • Written By: M. McGee
  • Edited By: Lauren Fritsky
  • Last Modified Date: 28 November 2016
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    Conjecture Corporation
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Stock management describes the steps and processes used by a business to maintain materials for sale. In most cases, stock management describes retail stores, but the term can apply to any step of a supply chain where goods both come into and go out of the business. These processes govern every aspect of stock handling from the initial order to the final sale. In a small business, there are usually few steps in this process, but large retail chains can have several different hubs from start to finish.

The most complex form of stock management is likely within a retail chain environment such as a nationwide department store. In a store like this, there are often several different locations fighting over a specific quantity of goods. In addition, there are multiple stops for a good between the initial order and the final sale.

The stock management process for one of these large retail chains will often follow the same steps, regardless of the product ordered. To begin, a specific store will notice that it needs a product. The store will contact the head office and request that the product be sent to it. The head office will collect all of the required purchases and send one large order to the supplier.

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At this point, stock management actually pauses for a few steps as the supplier deals with the order. Once the order is ready, the management system picks back up. The shipment is sent to a central warehouse where all of the orders are collected. The large shipment is broken into smaller pieces and shipped out to the individual locations. Once the original store gets the item, it will offer it up for sale to its consumers.

Smaller, or less complex, businesses follow the same basic process, but many of the individual steps are greatly simplified. For instance, a smaller store would likely skip the warehouse step in favor of an onsite storeroom. Even with the simplified step, the idea is still the same; a good is stored until it is specifically needed.

The majority of stock management uses Just-In-Time inventory, which centers on keeping stored stock as low as possible. When a new order is placed, the arrival date should be exactly when the current stock is about to run out. For example, if a store sells one item every day, the perfect time for the new shipment to arrive is on the day the last item will sell. That way, the new shipment is put directly on a shelf rather than a storeroom. Using this idea, the store reduces overhead since it has few things that aren’t directly for sale.

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