Contents. Before you begin. Introduction: Use inventory systems to organise stock control 1

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1 Contents Contents Before you begin v Introduction: Use inventory systems to organise stock control 1 Element 1: Identifying inventory and stock control systems 3 Section 1.1: Identifying inventory and stock control equipment, software 4 and systems Section 1.2: Understanding the importance of a common database approach 7 Section 1.3: Identifying and reporting discrepancies or variances 9 In ACTION 11 Assessment activity 1 13 Record your employability skills 13 Element 2: Using reorder procedures to maintain stock levels 15 Section 2.1: Checking stock levels 16 Section 2.2: Maintaining stock levels 18 Section 2.3: Using inventory systems 20 In ACTION 22 Assessment activity 2 23 Record your employability skills 23 Element 3: Organising stock counts and reporting variances 25 Section 3.1: Planning cyclical stock counts 26 Section 3.2: Giving clear directions 28 Section 3.3: Conducting stocktake activities 30 Section 3.4: Identifying record discrepancies 31 Section 3.5: Noting and correcting minor discrepancies 32 Section 3.6: Reporting major discrepancies 34 Section 3.7: Completing workplace documentation 35 In ACTION 36 Assessment activity 3 38 Record your employability skills 38 iii

2 TLIA3016A Use inventory systems to organise stock control Element 4: Producing inventory and record keeping reports 39 Section 4.1: Producing reports 40 Section 4.2: Understanding reporting procedures and regulations 41 In ACTION 42 Assessment activity 4 43 Record your employability skills 43 Final assessment 45 Employability skills 47 iv

3 Element 2: Using reorder procedures to maintain stock levels Element 2: Using reorder procedures to maintain stock levels Overview It is most important for warehouse staff to check, monitor and maintain the stock levels of stock items in the company s warehouse. Stocktakes and regular cycle counts contribute to monitoring item numbers. Organisations may use different reordering methods, though modern warehouses rely heavily on automated systems using scanning and computer software to monitor stock levels and reorder. Some workplace systems, however, require a level of human involvement in inventory management. Workers may be responsible for monitoring stock levels, noting when minimum points have been reached and acting according to enterprise procedures to initiate the reordering process. Learning outcomes You need to demonstrate competency in the following areas: Section 2.1 Checking stock levels Section 2.2 Maintaining stock levels Section 2.3 Using inventory systems 15

4 TLIA3016A Use inventory systems to organise stock control Section 2.1: Checking stock levels Effective procedures in a warehouse require that stores staff must be able to check on stock levels and provide accurate information about item quantities against actual and preferred stock levels. Depending on your workplace, its role in the supply chain and stock types it carries, inventory might be influenced by market conditions or dependent on the production of parent items. Maintaining optimum stock levels is important to good stock rotation and organisational profitability. Too much stock in store means too much of the organisation s money is tied up with inventory or, in the case of slow-moving date-sensitive items, there is the possibility of date codes expiring. Too little stock is not good either as it may lead to a stock-out situation, with stock shortages preventing the customer being provided with what they want when they want. Accordingly, it is crucial to try to order and monitor the just right stock level effectively. Among the three key ingredients for effectively monitoring and maintaining stock are: ensuring the accuracy of the stock tally conveying accurate information about stock items and the stock count accounting for all materials or goods that may be returns or damaged. The methods for monitoring stock levels will vary depending on the business. While some businesses maintain a manual inventory system, most businesses now use computerised systems where stock levels can be set, with reordering triggered as soon as a minimum stock level is reached. Reorder points can be preset by stores staff or management, or be linked to sales flows. In automated systems, stores staff may still need to authorise reordering or check that reordering occurs by running the appropriate report, as well as conducting cyclical stock counts to ensure the accuracy and integrity of the system. Central to a worker s role may be responsibility for running daily reports that monitor stock inflow/outflow and verifying stock levels. Depending on the nature of the business, the volume of item traffic in and out, and an item s perceived importance, stores staff may have to monitor stock levels of items either on a daily, weekly, monthly or quarterly basis. This can occur in a manual or semi-automated system, or even in a fully automated system where stock counts are part of workplace procedures. A simple and effective way to check stock level maintenance is to carry out random or regular cycle counts. For example, selected bins can be identified for maintenance counting and stock cards placed with the bin to monitor stock movements until the count is completed. 16

5 TLIA3016A Use inventory systems to organise stock control In ACTION Tony s story One of Tony s most important tasks is to check, monitor and maintain the stock levels of stock items in the Main Warehousing and Logistics warehouse. Tony s work and the effectiveness of the inventory system is the basis of the reordering process. Stock reordering is based on the reorder-point system: stores staff reorder when there has been movement of an item out of the store and a trigger point is reached. In recent weeks there has been significant demand for Part No A W fixed blade widgets. It s now one of the fastest moving stock items in the warehouse as it is a high-use component with a short life span; it is also easily damaged and has a defect rate of one in every eight units. The forecast for replacement is 16 per week, with a two four-week lead time for replacement; the reorder point is set at 80 units to allow a four-week lead time and a one-week safety stock level. Analysis of stock movement of widgets over the last six weeks shows an average demand of fifteen per week; when the defect ratio is considered there is a danger of stock-outs occurring. Tony decides that stocks of fixed blade widgets need to be monitored more closely than they are at present, so he talks to his staff about initiating a cyclical stock count on a fortnightly basis. Revision Checking and maintaining stock levels may occur automatically as part of an automated inventory system or involve manually checking stock levels through regular cycle counts. Maintaining safety stock is a method of avoiding stock-outs in which businesses carry a quantity of inventory to protect against fluctuations in demand or supply. Stock reordering may occur as a result of trigger points being reached or by following a reorder cycle system with stock ordered on a regular basis. It is critical that inventory orders and receipts are processed accurately by following correct workplace procedures. Are you ready? Use this checklist to assess if you are ready for assessment activity 2. I understand how to: Check stock levels Maintain stock levels Use inventory systems 22

6 Element 2: Using reorder procedures to maintain stock levels Assessment activity 2 Using reorder procedures to maintain stock levels The following table maps the assessment activity for this chapter against the element and performance criteria of Element 2 in TLIA3016A Use inventory systems to organise stock control. Part Element Performance criteria Whole activity 2 2.1, 2.2, 2.3 Obtain a copy of your workplace procedures for managing or maintaining the inventory. Use this information to help you answer the following questions. 1. Explain why it is critical to check and maintain stock levels. Outline what warehouse staff are trying to prevent. 2. What are the organisational considerations at your workplace that decide the different stock levels of goods or items? 3. How does identifying and reporting fast/slow-moving items help warehouse staff and management? 4. Outline the procedure for reordering stock used at your workplace. Research a brand/version of stock control software and report on how it handles reordering. Would this be a viable option at your workplace? Explain. 5. Explain your workplace procedures for entering or extracting information from the inventory system. What kind of information is gathered? Record your employability skills When you have completed the assessment activity, make sure you record the employability skills you have developed in the table at the end of the learner guide. Keep copies of material you have prepared as further evidence of your skills. 23

7 TLIA3016A Use inventory systems to organise stock control Section 3.5: Noting and correcting minor discrepancies Once a discrepancy has been identified it needs to be noted and corrected to ensure the accuracy of the system. Normally organisational policy guidelines and management decisions determine what constitutes a minor discrepancy from a major discrepancy in the stock records. Procedure will generally dictate that if a minor discrepancy occurs and stock is missing, the warehouse manager may elect to write-off the stock item and record the adjustment in the stock system. Another consideration for deciding what action is to be taken is whether the item in question is a non-critical item. Non-critical items are more likely to be written off and minor discrepancies will be tolerated. Critical items are seldom written off and major discrepancies will need to be fully reported. Where excess stock is identified, a necessary adjustment to stock levels will also need to be made and documented. In addition to making the necessary adjustment to inventory records, corrective action will ordinarily need to be taken to minimise the possibility of recurrence of discrepancies. Incorrect products or product quantities used to complete an order may point to a need for training of one or more employees, checking that storage areas are clearly marked or reviewing item codes that may be causing confusion. Data entry and recording errors of incoming/outgoing stock could be overcome by using bar code readers to replace manual methods. Stock put into incorrect storage areas could be a result of poorly marked bins, poor checking of inward goods, inadequate training or carelessness. Incorrect storing and recording of damaged stock/stock returns will return an accurate overall stock quantity but highlight poor work practices. Educating employees can help reduce theft and minimise waste. 32

8 Element 3: Organising stock counts and reporting variances Find out more foodprocessing.com.au Resource Waste reduction and stock discrepancy management Waste-reduction-and-stock-discrepancy-management Why it is useful This article discusses the development of weighing technology to assist with stock management. Section task How does your organisation define a minor discrepancy? At what dollar value does this occur? 2. List some examples of non-critical parts and/or items stored in your organisation s warehouse? 3. What are some typical procedures used for reporting and correcting minor discrepancies in your workplace? 33

9 TLIA3016A Use inventory systems to organise stock control Section 3.6: Reporting major discrepancies Once a discrepancy has been noted it needs to be corrected to ensure the accuracy of the system. Major discrepancies can include: hazardous substances being labelled incorrectly problems in relation to storing products with characteristics requiring specialised handling; for example, small parts, toxic, hazardous or flammable goods, perishable or fragile goods or goods requiring security arrangements problems where substantial stock is not at the location(s) it is meant to be in the warehouse; this can be a major headache if certain goods were meant to be quarantined and are no longer in their correct designated location(s) big differences in the stock recorded by the system and what actually exists on the shelf; major stock discrepancies and financial discrepancies in stock must be reported and investigated. Organisational policy guidelines determine what constitutes a major discrepancy in the stock records. Likewise, this policy will also determine how the discrepancy is accounted for and adjustments made. Another consideration for deciding what action is to be taken is whether the parts and/or items in question are critical. Based on the ABC indicator system, critical items in the A category that are missing from inventory may have to be reported and investigated. Find out more CQ University Australia Resource Policy on the physical stocktake procedures for all university inventory do?policyid=369 Why it is useful This document sets out the steps for conducting a stocktake, including dealing with discrepancies. Section task Explain what your organisation defines as a major discrepancy. 2. Outline the procedures that are used for reporting and dealing with major discrepancies in the organisation s warehouse. 34

10 Element 3: Organising stock counts and reporting variances Section 3.7: Completing workplace documentation After the stock count or stocktake has been conducted and data reviewed to identify discrepancies/variances, organisational reporting processes should then be followed. Depending on the nature and timing of the stock check, reports that may be generated can include: stocktake variation reports identifying areas of discrepancy/variation and volume of stock involved reconciliation reports for reconciling what the stocktake determines is in stock and what should be in stock according to the organisation s inventory records financial checks and valuation reports confirming the value of stock identified in the variation report end-of-period balancing procedures. Reporting procedures may also need to include data from bar code scanners. The reports produced as an outcome of any stock count need to be accurate as they can have major ramifications for the organisation in relation to stock value, as well on reviews of workplace procedures. Find out more Resource Effective Inventory Management Analyzing inventory adjustment Why it is useful An essay discussing the impact of inventory management on profitability. Section task 3.7 List the reports your organisation produces after a stocktake. Who receives them and what are the outcomes of these reports? 35