6.1 Stock management
Storage may be short-term for goods in transit or long-term to accumulate working stock that can be used for long-range planning and distribution, or used as a contingency.
The stock in the warehouse acts as a regulating buffer between supplies (stock entries) that are normally intermittent and needs (stock deliveries) that are normally regular or unexpected (emergency). Stock management involves managing an appropriate level of stock in the warehouse for regular needs as well as a certain level of supplies in case of emergencies. Stock has a cost-the price of items plus the warehousing charges (rent, human resources and materials). A good stock management system requires the right balance between costs and response to need.
The decision to create stock depends on several factors. First, you have to balance the benefit of holding stock against the cost of doing so. Second, you need to think about:
- protecting against uncertainty-if deliveries are late, sufficient inventory protects from stock-out
- bulk purchasing-prices are generally lower
- anticipating fluctuations or emergencies.
Warehouses contain different items identified as:
- fast/slow movers.
Items with a fast turnover, in terms of consumption, need good planning. Variations such as monthly consumption, delivery lead time (time period between accepting an order and the actual delivery of that order), expiry date (if applicable) and destination (what is going where) need to be monitored closely.
The quantity per item of stock required is based on two elements:
- Buffer stock-the buffer stock is the necessary quantity to supply the ongoing programmes without using the contingency stock.
- Contingency stock (or minimal stock)-the contingency stock is for unexpected events. Only vital articles form contingency stock. The contingency stock level is the result of coordination between the logistic department and the programme department. The contingency stock depends mainly on the humanitarian and security situation.
The following data are necessary to determine the buffer stock per article:
- estimated monthly consumption of the article
- frequency of orders to replenish the stock
- standard delivery time of the orders.