What is a Stocked Item?
By Jon and Matt Schreibfeder

The goal of effective inventory management is “to meet or exceed your customers’ expectations of product availability with the amount of each item that will maximize net profits”. We refer to the assortment of products you maintain to satisfy your customers’ needs as an “approved stock list”. But the word “stock” means different things in various situations.

Some people refer to any material in their warehouse or store as “stock”. But there is probably some “stuff” in your facility that your customers don’t want and should be liquidated. “Stuff” is definitely not on your approved stock list.

Most computer systems consider stock items (i.e., they have a “Stockable” flag of “S” or “Y”) as those products that should normally be replenished with minimum/maximum stock levels, reorder points/reorder quantities, or other parameters. That is, you plan to reorder the appropriate quantity of the item, at the appropriate time, to avoid stockouts and disappointing customers. But there are situations where you want to have quantities of an item in your warehouse but don’t want to automatically replenish stock of the product:

Non-Stock Items: These are products that are not normally maintained in inventory but ordered to fulfill a specific customer order (i.e., they have a “Stockable” flag of “N” or “NS”). Most computer systems do not maintain replenishment parameters for non-stock items and will not recommend an order for more than the customer requested.

Discontinued Products: The vendor may have discontinued or replaced the product. You can’t replenish inventory of the product, but you probably want to sell your remaining quantities of these items to customers if they want to buy it. Even though these products have a Stockable flag of “N” or “NS”), you probably don’t want to consider it “stuff” and liquidate your remaining stock.

Blanket Order Products: For a specific reason you have negotiated with the vendor to receive recurring, planned shipments of a product. For example, for a reduced cost, or to obtain advantageous payment terms, you agree to receive a certain quantity of the item each month, for the next 12 months. When dealing with products replenished with a blanket order, you want to be sure that your system will not set replenishment parameters that will cause you to automatically order more of the product resulting in surplus stock. In many situations buyers will consider blanket order products to be stockable items but set “frozen” minimum and maximum stock levels to zero, so the system will not apply automatic replenishment. However, if you take this approach be sure to implement a warning system to ensure that you do not run out of inventory between blanket order receipts. How you implement this warning depends on the features of your computer system. Please let us know if you would like to discuss your particular situation.

“Limited Life” Products: These are products that your organization plans to offer customers for a limited time. They may be seasonal items or special buying opportunities offered by one of your vendors. Typically, you will receive a single shipment of the product and offer it to
customers as long as you have remaining stock. Because you don’t plan to replenish your stock of the item, it should be classified as a non-stock product with a Stockable flag of “N” or “NS”.

To achieve the goal of effective inventory management you want to have the “right” inventory in your warehouse. Properly classifying your products is an important part of this process.