Types of Stock

• Raw materials and components that need to be purchased from outside the business.
• Stock of work in progress.
• Completed Output.

Costs of Stock

Apart from the actual cost of buying stock in the first place, there may be a number of other costs linked to stock. Too much stock can lead to:

• Money being tied up in the stock, which cannot be used for other purposes until the stock is sold.
• Possible cash flow problems may result from this.
• Increased storage costs, such as heating, lighting, refrigeration and insurance.
• Possible increased wastage of stocks.

• Idle workers and machines, and therefore lost output while wages and other costs still have to be paid.
• Orders are lost if deadlines cannot be met.
• Poor relations with customers, resulting from delays in deliveries.
• Loss of reputation and good will.