Stock control policy and procedures

Inventory control
The store has clearly defined policies and procedures in place and it is the
Supervisor’s responsibility to ensure inventory control is efficient, as loss of stock
and damages result in a loss of profit.

The buyer’s role

 Forecast sales and budget orders

 Keep up-to-date with trends

 Order merchandise

 Ensure a variety of merchandise

 Understand the target market

 Monitor stock levels

Supervisor’s role
It is the Supervisor’s responsibility to train staff members in the correct procedures
for receiving stock.

 Minimise shrinkage (theft and waste)

 Control the level of mark-downs

 Monitor stock levels

 Monitor fast and slow sellers to avoid sell-outs

 Coordinate stocktake and prepare reports for Management

 Ensure all merchandise is correctly priced, following Company procedures

 Monitor re-order levels for fast selling merchandise

 Liaise and communicate with the buyer over the sales performance of stock

 Inform all staff of new product lines and price changes

Staff member’s role
 Check the load

 Check delivery records and procedures

 Check the quantity and quality at delivery

 Check the quantity and quality after delivery

 Store the stock securely

 Deal with damaged and missing stock after delivery

 Inform Supervisor of any damaged or missing stock

Stock handling

Stock handling and storage of goods

Care must be taken in the storage of goods to ensure against damage and theft. A
fundamental part of your supervisory duty is to ensure the personal safety of your
staff members, and to provide a safe working environment. For more information,
refer to the Safe Work Practices Manual. A few issues relating to the safe handling of
stock are:

 All fire exits and fire extinguishers should be kept clear of stock for easy access in
case of an emergency

 Stock is to be stacked to prevent it from falling on staff members and customers

 There should be at least 30cm clearance above stock and around fire
extinguishers

 Empty pallets should not be stacked too high and are to be laid down flat and not
stored on their sides

Be aware that poor manual handling accounts for the majority of accidents in the
retail environment

Stock safety
Stock needs to be placed in security areas and put away as soon as possible. Store
procedures are to handle stock in the following manner:

 Special items, such as handling stock, must be stacked in the appropriate way and
hung on the appropriate fixtures

 Fragile items should not be stacked on other stock or on high shelves

 Perishable items must be stored at the specified temperature to keep them fresh
e.g. milk and frozen foods

 Flammable items should be kept clear of heat or combustible materials

 Storage for hazardous items must follow manufacturer’s storage and handling
instructions

Stock re-orders
Although our Company has a Stock Controller and Buyer, the Supervisor still plays
an important role in monitoring stock controls. Our policy is to always try and avoid
the situation of stock out by frequently communicating with the buying office. By
doing this, all staff members can be aware of planned promotions, target markets
and be informed of new stock items and trends for the new season.

An empty looking store or an overcrowded store will impact badly on sales.

 Re-stock shelves and display stands from stock in reserve

 Fax or email all order requests to the buying department with an order number

 File order forms in due date order

 Place orders on a regular basis; weekly or more often if required

 Supervisors are responsible for re-ordering all standard stock lines.

The buyer handles all other items, which are known as specialty lines.

Store pricing policy

The Store’s image is up to date, stylish merchandise. The type of customer our store
attracts is more image-conscious than price-conscious.

Our merchandise is medium- to high-priced, however, our emphasis is on supplying

a wide selection of quality merchandise as well as providing excellent customer
service. Furthermore, our store is known for our end of season mark-down sales
where merchandise is cleared at bargain prices.

Considering this, the purpose for a store pricing policy is for prices to reflect and fit
in with the store image, so that prices are competitive and most importantly, the
store makes a profit.

Mark-up and profit margin policies

Mark-up and profit margin polices are confidential to Management, the Stock
Controller, Buying Department and selected Supervisors.

There are two key elements to consider when developing a pricing policy. These are
mark-ups and margins.

Price Points are to be as follows:

Below $1: to be priced in even multiples of 10c, 20c, 50c, 70c, etc.

$1 and $2: as even dollar amounts $1 and $2

Over $2: prices should end in .95c so $3 becomes $2.95, $5 becomes $4.95 and $10
becomes $9.95

Over $30: revert to even dollar amounts $1 below the $10 multiples. So $50
becomes $49, $70 becomes $69, $100 becomes $99 etc.
Mark-up

Mark-up is the amount added to the cost price of merchandise to give a selling price
that meets profit requirements. All items are to be marked up 150% of their true cost
price.

The cost price should be multiplied by 150% and added to the cost price. For
example:

Cost Price Mark-up Selling price

$10 150% $25 rounded to price point of $24.95

$20 150% $50 rounded to price point of $49

$50 150 % $125 rounded to price point of $125

$100 150 % $250 rounded to price point of $249

Profit margin

Profit margin is the estimated gross profit that would be achieved by selling goods at
full selling price. It is calculated by deducting the cost of goods sold from the selling
price. For our store to be viable, a profit margin of 60% needs to be achieved.

$25 – $10 = $15 profit.

To convert this to a %, use the formula below:

((selling price – cost price)  selling price)  100 = Profit Margin

(($25 – $10)  $25)  100 = ($15  $25)  100 = 0.60  100 = 60%

It is important to understand that marking up merchandise 150% will only achieve a

60% profit margin. If merchandise is sold for less than the recommended selling
price for reasons such as stock losses, mark-downs, shrinkage etc., the overall gross
profit is reduced.

Some elements that contribute to the level of profit margin and mark up are:

 cost price

 freight

 storage

 wages

 rent
Supervisor’s role in mark-downs
All supervisors should be aware of the reason for mark-downs. Remember unwanted
stock takes up valuable space and costs our store valuable profits. It is the
supervisor’s responsibility to keep an eye out for slow-moving stock and suggest
strategies to rectify the problem. Supervisors must keep good records so that
Management can keep track of what is being marked down.

When should supervisors mark-down merchandise?

Merchandise is to be marked down at the end of its selling season or if it is slow

moving, obsolete, damaged or priced higher than that of our competitors. It is
preferred mark-downs are planned for holiday programs or special events.

Benefits of mark-downs:

 Increase the traffic flow of customers

 Increases the sales of other merchandise in store

Procedures for Mark-downs

 Supervisors must carry out a weekly inspection of merchandise in their

department and fill in report of slow moving merchandise and suggest mark-
downs figures

 Mark-down sheet is sent to the Stock Controller for approval and sign same

 Once the mark-down sheet is approved and signed by the Stock Controller, it is
the Supervisor’s responsibility to inform all staff members of the price mark-
downs to prevent embarrassing situations of staff members quoting old prices to
customers

 The mark-down sheet is to be filed in the mark-down book, which is kept under
the counter for easy reference to all staff.

Supervisors have permission to discount up to 15% on any items that are damaged or
stained without permission from the buying office. However it must be recorded on
the mark-down sheet. It is important for shrinkage and profit records that these are
recorded accurately.

A Mark-down Worksheet is attached later in this document.

The Supervisor should carry out spot checks to ensure:

 All staff mark merchandise with the correct price and are following store policy

 All price tags and tickets have been changed

 Staff or customers are not fraudulently changing mark-downs

Price marking
Price marking is a critical area, which, if not properly controlled, can cause major
problems with customers.

 All price tags are to be attached to the inside label of clothing garments.

 Never insert plastic tags through the garments.

 Other merchandise price tags are always to be placed on the right-hand corner of
the item.

 When a price is reduced, over stamping the old label with the mark-down price is
permitted.

 When the price goes up, all of the old label must be removed without fail.

 The price of merchandise on sale is correct and clear to the customer.

Coordinating stocktake
Stocktake is the physical count of stock that is in the store at a certain period of time
being a true measurement between the physical stocktake figures and the book stock.

Supervisor’s role

Preparation

Preparation and supervision are the key to a successful stocktake. Supervisors need
to keep updated. Give staff members clear direction and training of the store’s
procedures. Tasks should be allocated to staff members. Furthermore, all tasks on
the stocktake preparation checklist must be carried out.

Rosters

It is the Supervisor’s responsibility to consider budget allocation and time

constraints. Always ensure extra staff are rostered on to attend to customers’ needs
during this period. Stocktake is only to take place outside normal trading hours. If
time constraints allow, finish stocktake before 10am.

Supervisor’s responsibilities
When in progress:

 Allocate tasks in a logical order to ensure efficient progress and good end results.

 Stocktake should be completed in the shortest possible time.

 Issue staff members with stock sheets and direct them to appropriate area to
count.

 As a control measure, carry out random spot checks on staff counting and
recording procedures to ensure that tasks are completed.

On completion:

After the stocktake has been completed for a certain area, another staff member
carries out a spot check. It is Company procedure to choose five fixtures from an area
and complete their own stocktake.

These records are then compared with the original stocktake documentation and, if
there is a discrepancy, a report is compiled.

Discrepancies must be investigated and reported when preparing accurate reports for
Management. (Discrepancy Report attached)

Stocktake checklist
 Preparation and supervision is the key to successful stocktake. All Supervisors are
to ensure all tasks are carried out before commencing a stocktake

 Develop a concise set of instructions that can be used. Explain how to carry out
stocktaking to a new staff member

 Design a roster, allocate group members areas of responsibility

 Conduct a price check of tagging and bar code of fixtures

 Be aware of cut-off points for orders, deliveries and shelf filling. Plan a cut-off day
or time that these activities are carried out

 Ensure lay-bys are put aside and follow up and record any stock out of store on
loan

 Design a floor plan of the department where all fixtures are labelled and
numbered for easy identification. Numbered stock sheets are allocated to correct
staff members

Discrepancy reports
Obvious discrepancies to identify:

 Mark-downs that are not recorded for known shrinkage e.g. damage and theft

 Incorrect registration of mark-downs and transfers in and out

 Stock in the wrong position on fixtures for example, in reserve areas, above eye
level, on display, in drawers or closed bins

 Bar code for an item that does not correspond with fixture bar code

 Invoices or credits input incorrectly

 Staff incorrectly counting or pricing items

Stocktake staff training
It is the Supervisor’s responsibility to ensure all staff members are trained in the
correct procedures. The following instructions will make a good starting point for
training staff.

To ensure a successful stocktake, please observe the following

instructions:

 Your Supervisor will issue you with the appropriate stocktake

sheets and direct you to the area you will be counting.

 You must count each fixture as a separate unit because each has a
separate stocktake sheet.

 Every fixture is numbered and this number appears on the top-right

hand corner of the stocktake sheet.

 You must count each shelf from left to right, starting at the top shelf
and working your way down to floor level.

 You must not interfere or talk to other staff members when they are
counting.

 You must not leave your fixture in mid count.

 You must always count from physical stock to the stocktake sheet to
minimise counting errors

 You must make sure the fixture bar code corresponds with the
product bar code.

 Your supervisor will carry out random spot checks for quality
control.

Our Company has developed a coloured tagging system as a communication tool to

ensure a successful and accurate stocktake.

 Green stickers indicate that all items are checked and correct.

 Red stickers indicate there is a problem with the count or the bar code needs
investigating.

 Yellow stickers indicate counting is in progress and a Supervisor is to be called

for clarification.

 Blue stickers indicate second count has occurred.

Preparing accurate reports
When the physical count has been completed and recorded on stock sheets, stock
sheets need to be collated and put in fixture numerical order. Check that all addition,
cross calculations and totals are correct. Keep an eye out for obvious discrepancies.
After investigating any obvious discrepancies and reporting, it is the Supervisor’s
responsibility to collate into a report as follows:

Computer Data

Department Name:

Sales figures:

Stock level computer print out for the department:

Previous stocktake results for comparison:

Manual Data

Stocktake sheet for actual stock figures for the department:

Shrinkage sheets, mark-down sheet and a discrepancy report:

Shrinkage report
Our store allows for 3% shrinkage in our budget as we realise mistakes will happen.
However, effective stock control can minimise shrinkage. If you neglect control of
shrinkage, you may be out of a job. It is the Supervisor’s responsibility to ensure all
shrinkages are recorded correctly on the shrinkage sheets.

Possible valid reasons for shrinkage:

 Goods expire or go past their Use By date.

 Thefts sometimes occur.

 Items are wrongly priced.

 Goods sometimes are accidentally damaged.

 Display items get damaged or soiled.

Stocktake sheet
Fixture number:

Product Quantity Price Total Total

reference quantity value

167929    $1.55 15 $23.25

723496  $2.45 4 $9.80

235782        $6.55 45 $294.75
 

1122341  $7.45 2 $14.90

Staff member: _______________________________

Supervisor: _________________________________

Date: / / Time: : AM/PM

Shrinkage sheet

Description Ref No Dep Qty Price New Reason Total

t Price loss

Ladies socks 4702 7 1 $12.95 $7.95 Damaged $5.00

Mens training shoes 2648 5 1 $69.00 NA Stolen $69.00

Staff member: _______________________________

Supervisor: _________________________________

Date: / / Time: : AM/PM

Discrepancy sheet

Area Fixture/ Description Price Original Recount Variance

Item count

Socks H2 Black Kayser $2.95 20 17 3

Sports brief 4 Blue X brand $11.95 15 14 1

Staff member: _______________________________

Supervisor: _________________________________

Date: / / Time: : AM/PM

Mark-down Worksheet

Fix- Product Brand Size Bar Code Qty Price Mark- New
ture down Sale
No. % Price

3 Ladies X Brand 14 97341249907 11 $29.95 25% $22.95

Pyjamas

7 Boots Y Brand 5 57291288934 7 $89.00 30% $62.00

10 Board-shorts Z Brand 16 86431539845 6 $44.95 15% $35.95

Supervisor: _________________________________

Stock controller: _____________________________

Date: / / Time: : AM/PM