Finished goods stocks control


Finished goods stocks are required to be maintained at firm’s plant warehouse or at sales depots for ready dispatch to distributors, dealers or customers. Direct to customers is a case where specific goods are manufactured and stocked in the ware house or depots to facilitate the customer as a sales incentive or some sort of discount given to them

Finished goods stocks are a necessary for continuous and coordinated flow into the sales network towards which is a part of Market planning. Sales must also take care of maintaining the minimum possible stocks and the Marketing strategy should be directed so that the overall stocks do not exceed certain days of production depending upon the Product.

The extent to which inventory of stocks t is prudent must bear some relationship to prevailing economic conditions, e.g. in so far as they affect the availability of supplies and price trends. It is also dependent to a large extent upon the nature of the product concerned. It is often useful to express the finished goods stocks in terms of its rate of annual turnover, and this can vary between wide extremes. Therefore, it is impossible to lay down any single yardstick against how much goods are required to be stored.

The importance of stock control arises partially from the market demand and it is of far wider significance from the point of price fluctuations by virtue of the fact that finished stock can give rise to the following sources of cost:

1. Storage.
2. Handling.
3. Stock-taking.
4. Physical deterioration and its prevention.
5. Pilferage.
6. Insurance.

Product, design and the number of different items which it is necessary to hold are major influences upon stocks. The solution to this aspect of the problem may lie in a greater degree of standardization, simplification in product design and the products manufactured are compatible with the market demands. The advantage of this would become apparent, not only in connection with storage costs but also facilitate streamlining of production.

The costs which can be associated with finished goods stocks can also be reduced as a result of:

1. Improved market planning and anticipation of market demands including seasonal fluctuations.
2. Sound Distributor and Dealer network.
3. Meeting exclusive customers scheduled delivery dates.
4. Uniform induction of goods in line with the market demand into the market network..
5. The establishment of realistic optimum stock levels so that firm’s products are available to customers as and when required.
6. Negotiation of minimum credit terms with Distributors even offering them reasonable discounts.
7. Efficient stock records, regular stock-taking on perpetual or other bases, and check upon finished goods movement to alter the production lines and assess the product demands.
8. Implementation of computer systems like ERP, SAP etc.