Everything you use to make your products, provide your services and to run your business is part of your stock.
There are four main types of stock:
- raw materials and components - ready to use in production
- work in progress - stocks of unfinished goods
- finished goods ready for sale
- consumables - for example, fuel and stationery
Stock levels, then, will depends on type of stock
Raw materials and components
Ask yourself some key questions to help decide how much stock you should keep:
- How reliable is the supply?
- Are the components produced or delivered in batches?
- Can you predict demand?
- Is the price steady?
- Are there discounts if you buy in bulk?
Work in progress - stocks of unfinished goods
Keeping stocks of unfinished goods can be a useful way to protect production if there are problems down the line with other supplies.
Finished goods ready for sale
You might keep stocks of finished goods when:
- demand is certain
- goods are produced in batches
- you are completing a large order
For example, fuel and stationery. How much stock you keep will depend on factors such as:
- reliability of supply
- expectations of price rises
- how steady demand is
- discounts for buying in bulk