Marketing Essentials
n Chapter 24 Stock Handling and Inventory Control
Section 24.2 Inventory Control
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
What You'll Learn
 The concept of inventory management
 Different types of inventory systems
 Unit and dollar control of inventory
 How to calculate stock turnover
 The concept of stock management of basic,
model stock, and never-out lists
 The impact of technology on inventory systems
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Why It's Important
The inventory a business owns represents
money tied up in products until the
inventory is sold. Since inventory is a large
part of the total investment of a business,
well-managed and controlled inventories
increase the profits of a business.
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Key Terms
 inventory
 inventory management
 just-in-time
inventory system
 perpetual inventory system
 physical inventory system
 tickler control
 dollar control
 unit control
 stockkeeping unit
 stock turnover
 basic stock list
 model stock list
 never-out list
 real-time inventory
system
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Inventory Management
Inventory refers to an amount of goods
stored, including raw materials, purchased
components, manufactured sub assemblies,
works in process, packaging materials, and
finished goods.
Inventory management is the process of
buying and storing products for sale while
controlling costs for ordering, shipping,
handling, and storage.
Slide 1 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Inventory Management
A just-in-time inventory system is an
arrangement in which suppliers deliver
parts and raw materials just before they are
needed for production. Plants keep only
small stocks on hand to avoid tying up
money and inventory space.
Slide 2 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Inventory Systems
All merchandise bought and sold must
be tracked to gain the information needed
for effective inventory management.
Two methods of tracking inventory are:
 the perpetual inventory system
 the physical inventory system
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Perpetual Inventory System
A perpetual inventory system tracks the number
of items in inventory on a constant basis, as sales
occur. There are two strategies:
 Manual Systems Employees gather paper
records of sales and enter the information
into the inventory system.
 Computer Based Systems A point-of-sale
terminal automatically feeds sales transaction
data directly into a computer.
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Physical Inventory System
Under a physical inventory system,
stock is visually inspected or actually
counted to determine the quantity on hand.
 Visual Control Used to monitor physical
inventory levels. Stock cards specify the
number of each item to be kept on hand.
Slide 1 of 2
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SECTION 24.2
Inventory Control
Physical Inventory System
 Tickler Control A small portion of the
inventory is physically counted each
day so that the entire inventory is
accounted for on a regular basis.
 Annual Inventory Count Inventory
is physically counted once a year.
Most businesses do this.
Slide 2 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Using Both Systems
Many businesses use both inventory systems.
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
to identify errors or problems.
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Stock Control
Stock control involves monitoring stock levels and
investments in stock so that a business is run
efficiently. Planning and monitoring stock levels
requires the use of several different systems:
 dollar vs. unit control methods
 stock turnover calculations
 three stock lists (model, basic, and never-out)
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Dollar vs. Unit Control
Dollar control represents the planning and
monitoring of the total inventory investment
that a business makes. This information
helps a business determine its net profit.
Unit control refers to the quantities of
merchandise that a business handles. This
information helps a business make better
merchandising decisions.
Slide 1 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Dollar vs. Unit Control
In a unit control inventory system, each item
or group of related items is referred to as a
stockkeeping unit (sku). Tracking the skus
shows which items (including which sizes
and colors) are successful and which are not
selling. This system also helps show when a
product needs to be ordered.
Slide 2 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Stock Turnover
Stock turnover is the number of times the
average inventory has been sold and replaced
in a given period of time. High turnover rates
mean higher profit for the business because
its money is not tied up in inventory.
Slide 1 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Stock Turnover
Stock turnover rate is computed as follows:
Net sales (in retail dollars)
Average inventory on hand (in retail dollars)
When only cost information is available,
calculate stock turnover this way:
Cost of goods sold
Average inventory on hand (at cost)
Slide 2 of 2
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Stock Lists
There are three plans used to monitor
different kinds of stock. They are:
 basic stock list—for staple items
 model stock list—for fashion items
 never-out list—for very popular items
Slide 1 of 4
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Basic Stock List
October Sales
Stock
Description
Size
Packing
Units
1381
Skippy
Peanut Butter
32 oz.
24
4
1382
Skippy
Peanut Butter
18 oz.
24
8
1383
Skippy
Peanut Butter
12 oz.
24
8
1384
Jif
Peanut Butter
32 oz.
24
4
1385
Jif
Peanut Butter
18 oz.
24
8
1386
Jif
Peanut Butter
12 oz.
24
8
Cost
Retail
Min.
Stock
This
Year
Last
Year
November Sales
This
Year
Last
Year
December Sales
This
Year
Last
Year
Buyers use basic stock lists to plan purchases and keep track
of items that should always be in stock. Where on this list is the
stockkeeping unit (sku)? If you ran a retail store, what kind of
items would be on your basic stock list?
Slide 2 of 4
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Model Stock List
PRODUCT CLASS ____________________________________________________
Misses Sportswear
General
Styles
Specific Styles
Price
Range
Color
Total
Units
Size 6
Blouse
Sleeveless Tailored
$25
White
12
1
Black
12
Blue
Blouse
Short-sleeve Oversize
$35
Spring
SEASON ____________________________
Size 10
Size 12
Size 14
3
3
3
2
1
3
3
3
2
12
1
3
3
3
2
Pink
24
2
6
6
5
4
Orange
24
2
6
6
5
4
Size 8
Buyers use model stock lists for fashion merchandise. How and
why does this type of list differ from a basic stock list in form and
content? Why would it be more difficult to maintain accurate model
stock lists than basic stock lists?
Slide 3 of 4
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
Stock Lists
A never-out list is used for best-selling
products that make up a large percentage
of sales volume.
 Example: A video rental store will keep
a popular movie on the never-out list and
keep a large quantity of it in the store.
Later, more popular titles will replace it.
Slide 4 of 4
Chapter 24 n Stock Handling and Inventory Control
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SECTION 24.2
Inventory Control
The Impact of Technology on
Inventory Management
Technology is quickly changing the way stock is
handled and controlled. In particular, retailers use:
 UPCs to capture sku-level information at the
point of sale.
 Standard electronic data interchange (EDI)
transactions for electronic B2B communication.
 Standardized shipping container marking
(SCM) to quickly identify cases and their
contents.
Chapter 24 n Stock Handling and Inventory Control
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24.2 ASSESSMENT
Reviewing Key Terms and Concepts
1. What is inventory management and why is it
important?
2. Explain the concept of just-in-time inventory.
3. Name the two different types of inventory
systems used for inventory management.
4. What is the difference between dollar control
and unit control as they relate to inventory
management?
5. What is stock turnover?
Chapter 24 n Stock Handling and Inventory Control
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24.2 ASSESSMENT
Thinking Critically
Do you think a just-in-time inventory control
system could be used in a retail or wholesale
operation? Why or why not?
Chapter 24 n Stock Handling and Inventory Control
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24.2 Graphic Organizer
Inventory Systems
Perpetual
Inventory System
Tracks inventory on
a constant basis,
giving an up-to-date
record throughout
the year.
Manual
System
Computer
Based
System
Business can use
both systems,
comparing physical
records to perpetual
records to
identify problems.
Physical
Inventory System
Stock is visually
inspected or counted
to determine
actual inventory.
Visual
Control
Tickler
Control
Annual
Inventory
Chapter 24 n Stock Handling and Inventory Control
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Marketing Essentials
End of Section 24.2
Chapter 24 n Stock Handling and Inventory Control
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