Stock Cycle

Overview

Below is a comprehensive, business-focused explanation of the Stock Cycle, written from a Dafater business operations perspective, using clear language and practical examples.

1. Overview of the Stock Cycle and Its Importance

The Stock Cycle represents the complete business process of planning, receiving, storing, issuing, transferring, adjusting, and tracking inventory within an organization.

It ensures that: - The right materials are available - In the right quantity - At the right location - At the right time - With accurate valuation

An effective stock cycle helps businesses: - Avoid production delays and stockouts - Reduce excess inventory and carrying costs - Maintain accurate financial reporting - Improve operational efficiency and decision-making - Ensure traceability of items, especially regulated or high-value goods

In Dafater, the stock cycle acts as the backbone for procurement, sales, manufacturing, and finance activities.

2. Step-by-Step Business Process Flow

Step 1: Identifying Stock Requirements

Business teams assess current stock levels and future needs.
This could be driven by:
- Low inventory levels
- Sales forecasts
- Production plans
- Internal consumption needs

📌 Example: The production team realizes raw materials for next month’s manufacturing are insufficient.

Step 2: Raising a Material Request

A Material Request is created to formally request items.
It defines:
- What items are needed
- Quantity required
- Required date
- Destination warehouse

📌 Example: A material request is raised for 500 units of packaging material needed in the factory warehouse.

Step 3: Receiving or Issuing Stock via Stock Entry

A Stock Entry is used to:
- Receive goods into the warehouse
- Issue items for consumption or production
- Transfer stock between warehouses
- Record manufacturing or repacking activities

📌 Example: Raw materials are received into the main warehouse after supplier delivery.

Step 4: Storing and Tracking Inventory

Stock is stored in Warehouses.
Each item’s quantity and value is tracked per warehouse.
The system automatically maintains real-time balances.

📌 Example: Finished goods are stored in a “Finished Goods Warehouse” while raw materials remain in a “Raw Materials Warehouse.”

Step 5: Batch and Serial Tracking (If Applicable)

Some items require traceability:
- Batch: Used for expiry tracking or quality control
- Serial No: Used for uniquely identifiable items

📌 Example: Pharmaceutical products are tracked by batch for expiry, while electronic devices are tracked by serial number.

Step 6: Inventory Verification and Adjustment

Periodic physical stock counts are conducted.
Differences between physical and system stock are corrected using Stock Reconciliation.

📌 Example: A physical audit finds 495 units instead of 500; the system is adjusted accordingly.

Step 7: Ongoing Monitoring and Reporting

Inventory levels are continuously monitored using warehouse and item reports.
Decision-makers review stock movement, aging, and valuation.

📌 Example: Management reviews slow-moving items to avoid overstocking.

3. Key Documents Involved and Their Role

Document	Business Role
Item	Defines what is being stocked, including type, valuation, and tracking rules
Warehouse	Physical or logical location where stock is stored
Material Request	Formal demand for stock
Stock Entry	Records all physical stock movements
Stock Reconciliation	Adjusts stock to match physical count
Bin	Real-time stock balance of an item in a warehouse
Batch	Tracks groups of items with common attributes
Serial No	Tracks individual items uniquely

4. Business Prerequisites and Setup Requirements

Before operating the stock cycle, the business must ensure:

Items are properly defined with correct units and tracking rules
Warehouses reflect actual physical locations
Clear stock movement policies are documented
Responsible users are assigned for inventory operations
Batch or serial tracking rules are established where required
Periodic stock audit schedules are planned

📌 Example: Before starting operations, a company sets up separate warehouses for raw materials, work-in-progress, and finished goods.

5. Common Business Scenarios and Use Cases

Scenario 1: Internal Stock Transfer

Moving goods from central warehouse to retail outlets.

Scenario 2: Manufacturing Consumption

Raw materials issued to production through stock entries.

Scenario 3: Inventory Adjustment

Correcting discrepancies after physical stock counts.

Scenario 4: Expiry-Based Inventory Management

Managing perishable goods using batch expiry dates.

Scenario 5: High-Value Asset Tracking

Tracking laptops or machinery using serial numbers.

6. Best Practices and Important Considerations

Maintain accurate item master data
Use material requests to avoid ad-hoc stock movements
Perform regular stock reconciliation
Separate warehouses logically to improve visibility
Enforce batch and serial tracking for regulated or high-value items
Monitor slow-moving and obsolete stock
Restrict manual stock adjustments to authorized users

📌 Tip: Regular reconciliation reduces financial discrepancies and audit risks.

7. How Documents Flow Through the Cycle

Item and Warehouse form the foundation.
Material Request triggers stock demand.
Stock Entry executes the physical movement.
Bin updates automatically to reflect real-time balances.
Batch and Serial No maintain traceability.
Stock Reconciliation corrects variances.
Reports provide insight for business decisions.

📌 Flow Example:
Material Request → Stock Entry → Warehouse Stock Update → Bin Balance → Reporting → Reconciliation (if needed)

Conclusion

The Stock Cycle in Dafater ensures full control over inventory from planning to adjustment. When properly managed, it enhances operational efficiency, financial accuracy, and customer satisfaction. A disciplined approach to stock management transforms inventory from a cost center into a strategic business asset.

This document describes the stock cycle process and the related document types.

Stock Entry
Material Request
Stock Reconciliation
- This tool helps you to update or fix the quantity and valuation of stock in the system. It is typically used to synchronise the system values and what actually exists in your warehouses.
Warehouse
- A logical Warehouse against which stock entries are made.
Bin
Item
- A Product or a Service that is bought, sold or kept in stock.
Batch
Serial No
- Distinct unit of an Item

Process Flow

The typical flow for this cycle is:

Create Material Request for stock requirements
Create Stock Entry for material transfers or adjustments
Perform Stock Reconciliation for inventory accuracy
Track stock levels in Warehouses and Bins
Manage Items with Batch and Serial Numbers