Ordering from the company

The idea

The order a stockist places on the company is the primary order. A good primary order is not a guess and not whatever the company's officer asks for. It is worked out from one number per product: days of stock — how many days the stock in your godown will last at today's rate of sale.

At the godown

We are the stockist for a biscuit company. We order every Monday. The goods reach us on Thursday, three days later. So our order cycle is 7 days and our lead time is 3 days. We add 2 days as a safety cushion for a late truck or a sudden rush.

That gives a target of 7 + 3 + 2 = 12 days of stock.

For each product the sum is simple:

• Days of stock = stock in hand ÷ average daily sale
• Order = (target days × average daily sale) − stock in godown − stock already on the way

Here is Monday's order sheet. Sales are in cases, averaged over the last four weeks.

Glucose already has 13 days in the godown, so we order none. Cream biscuit has only 5 days, so it gets the biggest order.

At the price to stockist, the order is:

From order to godown

1. The order goes in — through the company's sales officer, a portal or an order form. Most companies set a minimum order value, and some ask for the money before they dispatch.
2. Payment — by bank transfer against the order, or on the credit days the company allows you. Keep the bank reference with the order.
3. The company's invoice arrives with the truck, along with the e-way bill and the transporter's copy (the lorry receipt).
4. Count before you sign. Open damaged cartons in front of the driver. Write any shortage or damage on the lorry receipt and get the driver to sign it.
5. Make the goods received note (GRN) against the company invoice, product by product and batch by batch. The GRN, not the invoice, is what goes into stock.

If 2 cases of Marie are short, the GRN shows 22, not 24, and the shortage becomes a claim on the company (chapter 3.13). Signing a clean receipt and finding the shortage later is how that claim is lost.

Common mistake

Accepting month-end loading. On the 28th, the sales officer is short of his target and asks you to take 200 extra cases of glucose biscuit "just this once". Glucose already has 13 days of stock. Two hundred cases at ₹492 is ₹98,400 of your money, sitting on the shelf for another 25 days. Next month the godown is full, you order less, and the officer asks again. Older stock ages towards expiry, retailers get older batches, and the damage claims grow. A polite "no" based on your days-of-stock sheet costs nothing. Saying yes costs interest every month, and sometimes the whole carton.

Where you'll use this

In Part 4, the software works out daily sale, days of stock and the suggested order from your billing (chapter 4.5), and the daily reports show which products are running short or piling up (chapter 4.8). The sum stays the same; you just stop doing it on a calculator.

Check yourself

1. You have 30 cases and sell 6 a day. How many days of stock do you have?
2. Order cycle 7 days, lead time 4 days, safety 2 days. What is the target days of stock?
3. Why must a shortage be written on the lorry receipt before you sign?

Answers

1. 30 ÷ 6 = 5 days.
2. 7 + 4 + 2 = 13 days.
3. Once you sign a clean receipt, the company and the transporter can say the goods arrived in full, and the shortage claim will be rejected.