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
the goods they
electronically. Information recorded can include:
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

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 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,
just-in-time
and Customer Service
(JIT) inventory
system
Every department in todays 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
regular basis.
entire inventory. A stockkeeping unit (SKU) X,
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 theft
Receiving errors
Incorrect counting and selling errors

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
dollar
control
The planning and
Dollar control X represents the planning and
monitoring of the
total inventory monitoring of the total inventory investment that a
investment that business makes during a stated period of time. It
a business helps a business determine the cost of goods sold
makes during a and the amount of gross profit or loss.
stated period of
time.

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
unit control
The quantities of
merchandise that
Unit control X measures the quantities of
a business
handles during a merchandise that a business handles during a
stated period of stated period of time. It allows purchasing
time. personnel to see what brands, sizes, colors, and
price ranges are popular.

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
inventory
turnover
The number of
Inventory turnover X is the number of times the
times the
average average inventory has been sold and replaced in a
inventory has given period of time. It is the most effective way
been sold and to measure how well inventory is being managed.
replaced in a
given period of
time.

Marketing Essentials Chapter 24, Section 24.2

Using Both Systems

The higher the inventory turnover rate, the more

times the goods were sold and replaced. Stores
that keep records of the retail value of stock
compute their inventory turnover rates as follows:

Net sales (in retail dollars)

Average inventory on hand (in retail dollars)

Marketing Essentials Chapter 24, Section 24.2

Using Both Systems

When only cost information about inventory is

available, inventory turnover can be calculated
with this formula:

Cost of goods sold

Average inventory on hand (at cost)

Marketing Essentials Chapter 24, Section 24.2

Using Both Systems

When a store wants to look at the number of items

carried in relation to the number of items sold, it
calculates its stock turnover rates in units with this
formula:

Number of SKUs sold

Average SKUs on hand

Marketing Essentials Chapter 24, Section 24.2

Using Both Systems

There are three plans used to monitor different

types of goods, staple items, fashionable items,
and very popular items. They are:
Basic stock list
Model stock list
Never-out list

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
basic stock
list
A list used for
A basic stock list X is used for those staple items
those staple
items that should that should always be in stock. It specifies the
always be in minimum amount of merchandise that should be
stock. on hand for particular products.

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
model stock
list
A stock list used
A model stock list X is used for fashionable
for fashionable
merchandise. merchandise. Goods are classified by general
classes and style categories. The model stock list
identifies how many of each type of item should be
purchased, but the buyer must select specific
models.

Marketing Essentials Chapter 24, Section 24.2

 Using Both Systems
never-out list
An inventory
monitoring plan
A never-out list X is used for best-selling
used for best-
selling products products that make up a large percentage of sales
that make up a volume. Items are added to or taken off the list as
large percentage their popularity fluctuates.
of sales volume.

Marketing Essentials Chapter 24, Section 24.2

 The Future of Inventory
real-time
Management
inventory
systems
An Internet Real-time inventory systems X involve
technology that Internet technology that connects
connects applications, data, and users in real time.
applications, This lets a company constantly track every
data, and users
in real time. product it sells from when it is manufactured
to when a customer receives it.

Marketing Essentials Chapter 24, Section 24.2

SECTION 24.2 REVIEW
SECTION 24.2 REVIEW

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Section 24.1
Successful stock management procedures help
control costs and ensure the continuation of
business operations. The steps in the stock
handling process include receiving goods,
checking them, marking the goods with
information, and delivering them.

continued
Section 24.2
Inventory is one of the most costly parts of
operations for many businesses. Inventory
management is the process of buying and storing
products for sale while controlling costs for
ordering, shipping, handling, and storage.
DECA performance indicators:
Explain the receiving process.
Explain the stock-handling techniques used in
receiving deliveries.
Resolve problems with incoming shipments.
Follow up orders.
Demonstrate orderly and systematic behavior.
CHAPTER 24 REVIEW
CHAPTER 24 REVIEW

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