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Give the essential requirements of an effective stock control system.

Give the essential requirements of an effective stock control system.

Answers

Martin
(i) Separation of duties: There should be a clear separation of duties between those who
receive record, issue and account for stocks.

(ii) Coordination and Co-operation: There should be proper coordination and co-operation
between the various departments dealing in materials i.e. purchasing department, accounting
department etc.

(iii) Stock Coding: There should be proper classification and coding of materials.

(iv) Planning: Material requirements for the individual departments and the whole organisation
should be properly planned.

(v) Centralization Degree: The degree of centralization of the purchasing and stores function
should be compatible with the size of the organisation. However, the idea is a central
purchasing department under the control of a competent expert purchase manager.

(vi) Working Perpetual Inventory System: One perpetual inventory system should be operated
so that up-to-date information is available about the quantity of material in stock.

(vii) Proper Accounting System: Adequate records should be maintained to control materials
during production and to be able to produce timely, accurate and complete stock reports.

(viii) Storage: The storage of all materials should be well-planned and subject to adequate
safeguards and supervision.

(ix) Stock Levels: The various stock levels for each item of materials should be fixed e.g. stock
re-order level, minimum stock or maximum stock.

(x) Budgeting: Raw material purchases should be controlled through budgets based on annual
demand.
(xi) Internal Controls: An efficient system of internal audit and internal check should be
operated so that all transactions involving materials are checked by reliable and independent
persons.

(xii) Regular Reporting: There should be regular reporting to management regarding purchases,
issues and stocks of materials. Special reports should be prepared for obsolete items,
spoilage, returns to suppliers etc. A system to deal with slow moving stocks and those near
expiry should be in place e.g. to declare a special offer on them so as to clear them.

(xiii) Economic Order Quantity: All purchases should be done at their EOQ so as to minimize
the total stock costs.
marto answered the question on February 26, 2019 at 09:48

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