For suppliers and manufacturing companies alike the efficient management of stock is a vital element of their business.
In many cases business failures can be traced back to the inability of a company to turn its stock back into cash within an acceptable time frame.
It is worth noting the costs associated with carrying stock:
Holding stock ties up working capital with otherwise could be used for other purposes therefore it has an opportunity cost.
All stock being held incurs storage costs such as rent and other utilities. Insurance especially for high value goods also is an expensive add-on.
If goods are being funded via a Bank overdraft or loan this may well inhibit the company’s ability to finance other activities as Banks are reluctant to extend terms.
There is always the danger that stock can become obsolescent or in the case of perishable products deteriorate and become a write off.
The only way to ensure that a company keeps track of this area of exposure is by constant monitoring of stock levels and focussing on unusual or irregular patterns in the movement of stock.
No comments:
Post a Comment