CHAPTER II

CONCEPTUAL APPROACH TO STOCK MANAGEMENT

Stock management is an important function for both a commercial enterprise and an industrial
enterprise. Inventory management consists of planning, organizing, directing and controlling
the activities relating to all merchandise stocks held in the company. However, inventory
management is an entire process from the purchase of the goods, their entry into stock, their
release in stock and their accounting. We will insist here on the definition and the categories
of stocks, the analysis of the purchasing process, the selection of the suppliers, the optimal
material organization of the stocks and finally the inventory organization.

SECTION I - THEORETICAL CONCEPT OF INVENTORY MANAGEMENT

I- DEFINITION AND CATEGORIES OF STOCK

I-1 DEFINITION
According to the Uniform Act relating to OHADA accounting law, inventories include the set
of goods or services that intervene in the business's operating cycle either to be sold in the
same state or as production to come or going or to be consumed generally at first use. In the
context of a commercial enterprise, stocks are defined as goods made for resale and
characterized by their variety. For industrial companies, stocks consist of raw materials, semi-
finished products, goods in progress, finished products.
From these definitions we can highlight the categories of stocks that will be the subject of the
following paragraph.

I-2 CATEGORIES OF STOCKS

There are two main categories of stocks:
Ø The stock of manufactured products
They consist of raw materials, consumable materials and supplies, commercial packaging.
Ø The stock of finished and outstanding products
They include finished products, intermediate or semi-finished products, work in progress, by-
products, residual products and manufactured commercial packaging.
II- ANALYSIS OF THE PURCHASE PROCESS
The buying process can be summarized in three steps:
• The birth of the need
• The placing of the order
• The delivery

II-1 THE BIRTH OF NEED

This is the first step of the buying process. The activity of the company brings out needs of all
kinds in the services, so the process consists of defining and describing the product (s) able (s)
to satisfy the needs of the customers.

II-2 ORDER PASSING

The order is a legal act that commits the buyer to the supplier and that includes all the needs
for products expressed in quality, on a document called purchase order. It is carried out when
the stock reaches a certain level and this according to the objectives of the company and
taking into account delivery times.

II-3 DELIVERY
This is the act by which the supplier makes the ordered products available to the company. It
is materialized by a document called delivery note. The delivery is done within the deadlines
and conditions stipulated in the contract signed by the parties (company and its supplier).
When stocks arrive at the store, the inspection service must check whether the stocks received
comply with the substantive and formal conditions laid down in the contract.

III- SELECTION OF SUPPLIERS

The supplier selection process is very important in the threat where the manager must choose
the one that will enable him to achieve his goal of minimizing costs, achieving a potential
profit and satisfying the market. The process must be done according to several criteria
namely:
• The quality
• The price
• Conditions

III-1 QUALITY
The quality of the product is decisive in that it satisfies the customer and enhances the image
of the company in terms of supplies of good quality products. Thus the choice of suppliers by
the company must take into account the "product quality" factor.

III-2 THE PRIZE

As one of the manager's objectives is to minimize the costs associated with the management
of the stock, he must therefore source from the supplier offering the products at affordable
prices depending on the means available to the company. Also the choice of suppliers by the
company must take into account the "price" factor.
III-3 CONDITIONS
The choice of suppliers must also take into account the conditions offered by the supplier,
namely:
- The quality of the product
- The delivery time: it must be as short as possible in order to avoid stockouts and to meet the
needs of customers at any time.
- Payment conditions
- Delivery conditions

IV- MATERIAL ORGANIZATION

The material organization of the stock is based on the evaluation of the stocks received.
Knowing that it is not always easy to manage all product stocks with the same attention. The
analysis of the various goods stored shows that they consist of a small number of items having
a large share of the value of the stock. Two methods of analysis are generally retained: the
ABC method and the 20/80 method.

IV-1 THE ABC METHOD

ABC analysis is a more refined version of the 20/80 analysis. Here, three categories of stocks
are highlighted:
- 10 to 20% of the stock items (category A) represent 70 to 80% of the total value of the
stock; their good management is imperative.
- 20 to 30% of articles (category B) represent 10 to 20% of the total value of the stock; their
management is more or less important.
- 50 to 60% of articles (category C) represent 5 to 10% of the value of the total stock; their
management is not a priority.
Its purpose is to identify the priority elements. Above all, it is important to define what is the
purpose of the analysis. Once the goal is clearly identified, the data on which to base the
analysis is easily identifiable. For example :

  * identify the items generating the most (class A) or least (class C) rotation in a warehouse
  * identify the families that represent most of the stock (class A)
  * weight the causes generating product returns in warehouse
  * classify suppliers according to the volume of purchase
  * classify product families according to sales volume.

IV-2 THE 20/80 METHOD

This method shows that
- 20% of the products in number represent 80% of the total value of the stocks.
- 80% of the products in number represent 20% of the total value of the stocks.
Its purpose is to select the articles for which stock management should be prioritized. When
we notice that about 20% of the referenced products represent about 80% of the value of the
stock, we apply to these products a complex and rigorous management (the 80% in quantity
which represents only 20% in value are applied a management a lot). more flexible).

Note: These inventory management methods are theoretical. Their actual application can vary
a lot from one company to another.
SECTION II- OPTIMUM MANAGEMENT AND MONITORING AND MONITORING
AND STOCKS
I- OPTIMAL MANAGEMENT OF STOCKS
The optimal inventory management is the set of ways and means implemented by the
manager so that the company bears the lowest overall cost of storage possible. Generally,
mathematical models accepted in the framework of operations research are used to satisfy
stock management rationalization requirements, the most used of which is the method of the
economic quantity to be ordered (WILSON model) that we will analyze in the after. But first
we will analyze the different stock levels and the costs of inventory management.

I-1 THE DIFFERENT LEVELS OF STOCKS

There are different stock levels in the stock management process:
- The average stock: it is the one that for a given article and a given period is in store. It is
calculated from the relation: SM = (INITIAL STOCK + FINAL STOCK) / 2 if the company
has an initial stock and a final stock; otherwise we will have: SM = CONSUMPTION / 2

.NUMBER OF CONTROL.
- The security stock: this is the level of stock to be provided by any company to deal with
unforeseen events.
- The stock of alert or security: it is the level of stock which triggers the order, in other words,
it is the level of stock which makes it possible to satisfy the demand during the delivery
periods and to maintain the stock of security if it exists.
- The minimum or critical stock: it is the stock from which the company wants to never find
itself, it makes it possible to avoid any break, even if an exceptional event occurs
(delay of delivery, sudden acceleration of order ... etc.).
- The maximum stock: it is the level of stock that the company avoids to go to the Delas for
reasons of insufficient storage area which could cause the risks of slump or overall costs of
storage too high.

II- COSTS GENERATED BY STOCKS

The OHADA Uniform Act defines cost as charges incurred to achieve a specific objective to
carry out an activity, various costs are related to the stock namely:
- The overall cost of ordering or launching costs
- The overall cost of storage or possession of stock
- The cost of shortage or cost of breaking stocks

II-1 THE ORDERING COST

The start-up cost or the cost of placing orders represents all the costs related to the placing of
orders, among which we quote: telephone costs, fax, air ticket, photocopying fees, telex ... etc.
.
II-2 THE COST OF POSSESSION OF STOCK OR COST OF STORAGE
The inventory holding stock is made up of physical storage costs but also of the non-
regularization of capital assets in the stock (see the cost of capital borrowed to finance the
stock).
The annual possession rate t% is the cost of ownership reduced to the monetary unit of stored
material. It is obtained by dividing the total cost of possession charges by the average stock.
These costs cover: the costs of shopping (rent and maintenance of the premises, insurance,
personnel and handling costs, guarding, electricity ... etc.), the interest of the immobilized
capital, the deteriorations of the material and the risks of obsolescence.
II-3 THE COST OF SHORTAGE OR LOSS OF STOCKS
It is a cost that aims to avoid all stockouts, because the purpose of the company is to ensure
the availability of products that make up the stock.
v The economic quantity to order
Inventory management involves answering the following questions:
• How to minimize stocks?
• What should I order?
The principle of the economic quantity to order or model of WILSON tries to answer it. The
principle is based on the following assumptions: during the period considered (the year in
general), the demand is certain to be known. This demand is uniformly distributed over time
(there is no seasonal variation). Delivery times are known and strictly respected. The purchase
price is constant (independent of the quantity ordered). In such a context, there can be no
stock-outs. We will talk here:
• The cost of owning inventory
• The cost of launching orders

Terminology:
Let Q be the economic quantity ordered, D the consumption, N the number of orders placed
during the exercise, C the proportional purchasing factor, CL the cost of launching an order,
CS the storage cost of one unit, TS the possession rate for 1 F of the average stock, P the unit
price, CGC the launch cost, CPS the cost of storage and CTG the total cost of inventory
management.
Calculation of the different costs:
CTG = CGC + CGL, gold CGC = N x C and CGL = SM x TS x P or CGL = CS x? Q / 2 x T
Thus CTG = N x C + CS x Q / 2 x T knowing that N = D / Q, we will have CTG = C x D / Q
+ CS x Q / 2 x T.
The economic quantity to be ordered is that which makes it possible to minimize the overall
cost of management; therefore it will be necessary to determine Q * and N *:
Q*=
N*=

The model based on the economic quantity seems attractive but the assumptions on which it
rests are often very far from the reality because it considers that the future is certain and that
the demand is known, which is not often the case in the practice where consumption is not
constant and no shortage is allowed, which is not verified because, there are on the one hand
hazards that affect deliveries and on the other hand a relationship between replenishment cost
and the ordered quantity which are random variables.
In the end, despite the limitations that make the WILSON model a theoretical model, we can
notice that these hypotheses have had the merit of simplifying the mathematical models of
inventory management.

III- MONITORING, MONITORING OF STOCKS AND ACCOUNTING RECORD

Stock movements experience certain critical moments which spontaneously provoke adequate
follow-up provisions in order to avoid either counting errors (inventory, receipt of deliveries,
customer visits, stock conservation, delivery preparation, risk cover flight or fire). For this
purpose, the stock is tracked and checked on a daily basis using the stock cards or an
inventory account and for the manual stock management cases by simple recording and
recording of the output movement as well as case of computerized management of stock. In
either case, a physical inventory is performed at the end of each exercise.
III-1 CHECKING FROM INVENTORY SHEETS
The stock sheet is a document that shows the different stocks that are found in the company
(in quantity and value) and these different movements of entry and exit. There is no standard
layout because each company presents its sheet according to the categories of stock it has.

III-2 FOLLOWING PHYSICAL STOCK INVENTORY

The accounting law OHADA in its article 17 paragraph 6 defines the physical inventory as
being the operation which consists in recording all the elements of the patrimony of the
company by mentioning the nature, the quantity and the value of each one of them to the
inventory date.
It's an extracomptable inventory. It is realized in two stages namely:
- The organization of the inventory teams and the refinement of the inventory documents:
before the start date of the inventory operations, the head of the accounting organization
establishes teams of 3 and 4 people to carry out inventory and to establish a complete list of
the various elements of the stock.
- Inventory reports: the enumeration of assets; the inventory can give rise to 3 types of report:
• The existing stock equals the theoretical balance from accounting: this is the case generally
desired that does not pose any particular problem.
• The existing inventory is higher or lower than the theoretical balance: it is advisable to carry
out research both in the bookkeeping and in the keeping of the store so as to find the origin of
the discrepancy and to proceed with the regularization of the anomaly.
• The existing inventory no longer has market value: this is the case of deteriorated stocks and
in this case, special procedures must be implemented to ensure sincere financial
communication in the search for the delivery of a faithful image of heritage.

III-3 ACCOUNTING RECORD

Registration of Goods Receipts and Outflows in Permanent Inventory
The permanent inventory system advocates the day-to-day recording of entries and exits from
stock stores.
Inventory entry of goods
DCDC

Companies that can not afford to keep the inventory can use intermittent inventory.
Accounting records of goods in intermittent inventory.
The intermittent inventory is a stock organization in which only those quantities and values
are quantified periodically at least once a year. So when a company practices it only accounts
for purchase and sale invoices. Inventory movements are managed by commercial
management software (SAARI). At the end of the fiscal year, thanks to an extracomptable
inventory, the physical stock or initial stock of the next fiscal year is determined and
recalculated from the weighted average unit cost of the storage period. This makes it possible
to pass either the inventory change posting or the write-off posting and the final stock
recognition that will become the initial stock for the new year.
Accounting entries
DCDC

There is also a method that consists of passing a single entry to record the variation of the two
stocks. The change in stock thus calculated can be a storage if the initial stock is lower than
the final stock or a destocking if the initial stock is greater than the stock. final.
DCDC

PART II
PRESENTATION OF THE IMPEXTEAM STOCK MANAGEMENT PROCESS,
RELATED PROBLEMS AND POSSIBILITIES OF IMPROVEMENT
In this part, our concern is the peculiarities of stock management at IMPEXTEAM where, as
we said before, the purchases are made at international and national level.
Given that IMPEXTEAM has set up a stock management method, how to identify and
guarantee the accounting traceability of the purchase and sale of goods. The answer to this
concern will form the backbone of this second part, we will not be able to finish without
bringing our comments or shortcomings, while proposing possible possibilities of
improvement.

CHAPTER III
PRESENTATION OF THE STOCK MANAGEMENT PROCESS WITHIN IMPEXTEAM
The particularity of inventory management at IMPEXTEAM is located at the level of supplies
and sales. Thus, the purchase transactions are carried out both on the international and
national markets, hence the search for suppliers remains a permanent quest and it is the same
for its customers located in Cameroon and in the United States. sub-region of Central Africa.
Notwithstanding the difficulties related to the relations of trust and insurance on both sides
between IMPEXTEAM, its suppliers and its customers. The study of these relations will form
the backbone of this chapter.

SECTION I - ANALYSIS OF PROCESS OF PURCHASE AND CHOICE OF SUPPLIERS

I- ANALYSIS OF THE PROCESS OF PURCHASE

II- At the international level, orders are placed quarterly during the year at
IMPEXTEAM, to make up for any stockouts, orders are also made at the national
level to satisfy its customers.
I-1 BIRTH OF NEED
To return to what we have just said above, IMPEXTEAM takes into account the general rules
of purchase, that is to say the respect of a certain supply rhythm stopped and breaks that cause
the need to purchase .
I-2 ORDER PASSING
The offers being made at international and national level, they are attractive if the prices are
competitive in the market, given the quality and diversity of the products.
I -3 DELIVERY
After the conclusion of the contract of sale between the parties (IMPEXTEAM and its
suppliers), with regard to international purchases, the financial institutions take care of the
insurance of the goods which pass directly to the embarkation. These goods remain the
property of the supplier until the port of Douala for a possible landing; when the boat berths at
the port of Douala, the Cameroonian customs takes care of the declaration of importation of
these goods. Their check is necessary to check if the quantity and the quality of the goods
mentioned on the invoice correspond to the purchase order while respecting the ISO standards
in order to confirm to the supplier the good reception of the goods ordered. The company
rents the carriers who transport the goods to the company's main warehouse or depot.
In addition, for locally procured goods, it is the local suppliers who transport the goods to the
company store. Upon arrival these goods are controlled by the storekeeper who takes care of
storage while checking if the quantities delivered are those mentioned on the order form.

II- CRITERIA FOR THE CHOICE OF SUPPLIERS

The choice of a supplier is not always easy, the search for suppliers remains a major concern
for companies. In order to satisfy and retain its customers, IMPEXTEAM opted for a policy
of the best products at prices accessible to all these customers. When IMPEXTEAM faces a
multitude of offers, the main concern of the management controller is whether the products
offered are of good quality, if they will be sold on the market as quickly as possible to avoid
storage costs too much. high and at what price. This concern refers to whether customers will
appreciate the products in order to achieve a result, not to mention the terms of settlement
favorable to the company. Once when all these conditions are met, we actually place the
order.

SECTION 2 - MATERIAL ORGANIZATION AND RECEIVED STOCK MANAGEMENT

INDICATOR
I- MATERIAL ORGANIZATION OF STOCKS
I-1 IDENTIFICATION OF RECEIVED STOCKS (GERBAGE) AND CLASSIFICATION
GERBAGE is the act of sorting the products in the stores on top of one another so as to easily
recognize them. In IMPEXTEAM stores, goods are sorted by reference items, so there are
binders between them and pens between them to name a few. It is therefore with great care
that the received products are assigned a product family code, a reference (article bar code)
and an entry value.

I-2 INVENTORY MANAGEMENT INDICATOR

These are elements that constitute the warning sign for the birth of the need and the placing of
the order or the guarantee of the stock level par excellence according to its objectives
a) The different stock levels
The theoretical management of the stock makes it necessary to be cautious different stock
levels which each have a specific meaning, in practical terms, IMPEXTEAM has established
its own method of inventory management. Supplies are conditioned by the availability of
products nationally and internationally. This is how there is a minimum amount of stock
without alert purpose to trigger the order.
(b) Costs generated by stocks
It is :
v Cost of placing the order or launch cost
It consists of telephone charges, travel expenses of the person in charge of the supplies,
photocopies, incidental expenses globally ... etc.
v Cost of ownership or storage
It is composed of all the expenses requiring the acquisition of the stocks, among which one
can quote: handling charges, security costs, insurance costs of the goods ... etc.
(c) Inventory control and monitoring
Inventory control and monitoring imply the implementation of the practical monitoring and
verification provisions to prevent theft, breakage or delivery errors from the agents
responsible for the distribution. It is a matter here to demonstrate how inventory control and
monitoring mechanisms are developed. This is the stock inventory and stock inventory and
tracking instruments

v Physical inventory inventory

Within IMPEXTEAM, inventory control and monitoring is done from a physical inventory.
IMPEXTEAM uses consulting firms to determine the actual quantities in stock at the end of
the financial year and compare them to the stock that is in the machine according to the SAGE
SQL software (commercial management). With regard to permanent inventories, they are
non-existent because of the multiplicity of product ranges, the time but also the volume of
annual supplies. The appendix shows the families of articles and some articles according to
their reference.
v inventory and inventory tracking instruments
Inventory tracking within the company at the base by the stock department including the
storekeeper. The latter notifies all the information concerning the movements of exits of
entries of goods and transmits his data to the service stock to verify the accuracy of the data
with the help of the documents which he received all throughout the day, in order to compare
to have an estimate of the actual in stock. It is the SAGE SQL COMMERCIAL
MANAGEMENT software that are the different movements of article in stock.

CHAPTER IV
PROBLEMS ASSOCIATED WITH STOCK MANAGEMENT WITHIN IMPEXTEAM
AND POSSIBILITIES FOR IMPROVEMENT
Having reached this stage, we will be talking about highlighting the inadequacies identified in
IMPEXTEAM inventory management and finding solutions to overcome these deficiencies.

SECTION I - PROBLEMS RELATED TO STOCK MANAGEMENT

Managing a stock means implementing techniques that will minimize storage costs while
protecting against stockouts.

I - IMPEXTEAM STOCK BREAKS

IMPEXTEAM has a stock of high turnover items that should not have any cases of breakages,
office supplies (reams of paper, manifolds, notepads, registers, office binder ...) and computer
equipment (key USB, ink cartridges for printer, computer mouse ...), this lack of stock item
can generate huge costs to the company. The question here is how do stock-outs occur that are
their consequences within IMPEXTEAM?

I-1 THE CAUSES OF STOCK BREAK

Despite its supply policy, IMPEXTEAM often experiences stock-outs of certain products.
This break can occur due to the delay of deliveries, the approximate choice of suppliers, the
lack of control of the security stock and also the abundance of customer requests; Since the
orders of these customers are not regularly stable, the quantity of merchandise in stock does
not meet the needs expressed by its customers. At this level it is necessary to trigger the
process of direct replenishment to achieve it, it would be necessary to contact either always
ready to satisfy the demand because any delay at this moment will have adverse consequences
on the company.

I -2 THE CONSEQUENCES OF THE STOCK BREAK

Frequent stock-outs lead to a delay in the execution of tasks and therefore a delay in the
delivery of the work, which creates a bad image of the company. Thus the company, with the
primary concern of being profitable and preserving its image, will see some of its expenses
increased like additional supply costs. In addition, the extended period of execution can lead
to the departure of certain customers who are experiencing a crisis of confidence in the
company compared to their expectations.
II - OVERSTOCKING
Since the general store space at IMPEXTEAM is not very large to meet the storage
requirements, the structure should be optimized for space. This is how certain items such as
large perforators, D50 ESSELTE chronographs, mini staplers ... should not be ordered in
large quantities because they are the least consumed items. However it would be wise to note
the causes of overstocking and their consequences.

II-1 CAUSE OF OVERSTANDING

The overstocking would find its origin in the unwise orders whose motivations are far from
being related and in managerial rigor. We can cite :
v No control of the existing stock
v No control of storage

II-2 CONSEQUENCES OF OVERSTOCKING

The stock being immobilized money, this overstocking can cause huge losses in the company
(risk of depreciation, theft, destruction ...) Therefore, if this money had been deposited in the
bank, it would have produced interest necessary to enable the company to cover some of its
expenses; moreover, overstocking reduces the space in the store. The more you stock, the
higher the cost of storage because of the costs incurred for the safety and maintenance of the
items, which can lead to the reduction of the profit of the company.
After presenting the problems of inventory management at IMPEXTEAM, their causes and
their consequences. It is necessary for us to make suggestions for improvement inherent to the
various problems raised. This is the focus of our concern for the next section.