FAQs: Stock Control Charts
What is a Stock Control Chart?
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A Stock Control Chart is a visual tool used in inventory management. It's typically a graph that plots the stock level of an item over time. It helps businesses monitor inventory, predict when to reorder, and avoid stockouts or excessive stock levels.
What does a Stock Control Chart show?
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The chart primarily shows:
- Actual Stock Levels: How much inventory is currently on hand over a period. This often shows a declining line as stock is used, followed by a sharp increase when a new order arrives.
- Key Stock Levels: Important thresholds like the Maximum Stock Level (the most inventory you want to hold), Reorder Level (when to place a new order), and Minimum Stock Level or Safety Stock (a buffer to prevent stockouts).
- Timing of Orders and Deliveries: When orders were placed and when new stock arrived.
What do the lines in a Stock Control Chart represent?
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Stock control charts feature several key lines:
- Actual Stock Line: Shows the fluctuating level of inventory over time.
- Maximum Stock Level Line: A horizontal line indicating the upper limit of desired inventory.
- Reorder Level Line: A horizontal line showing the stock level at which a new order should be placed. When the actual stock line drops to this level, it triggers an order.
- Minimum Stock Level (Safety Stock) Line: Often a dotted line, it's a horizontal line indicating the lowest acceptable stock level. This buffer helps cover unexpected demand or delays.
- Lead Time: The time period between placing an order (at the reorder level) and receiving the stock. The chart shows stock levels decreasing during this period.
How do you draw or make a Stock Control Chart?
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To create a stock control chart:
- Draw a graph with the horizontal axis representing time (days, weeks) and the vertical axis representing stock quantity.
- Calculate and draw horizontal lines for the Maximum Stock Level, Reorder Level, and Minimum Stock Level (Safety Stock). These are based on historical data, forecasts, lead times, and desired safety margins.
- Plot the actual stock level over time. As stock is used, the line will trend downwards.
- When the actual stock line hits the Reorder Level, mark the point where an order is placed.
- After the Lead Time, draw a vertical line showing the arrival of the new stock, causing the actual stock line to jump back up (ideally below or at the Maximum Stock Level).
This process is often automated by inventory management software, but understanding the manual method helps grasp the underlying principles.
