The success of your business depends on how well you utilize effective inventory control measures. It depends on how well you buy, store, sell and deliver your inventory. Devoting time and resources to this process is key to long-term growth. However, your inventory will control you, if you do not take control of your inventory. Therefore, it’s substantial to invest money in products that will sell so you can enhance inventory turnover and warehouse space.
Meaning of Inventory Control
Inventory control is the process of ensuring that appropriate amounts of stock are maintained by a business, in other to meet customer’s demands without delay while keeping the costs associated with holding stock to a minimum.
Best Way to Control Inventory
Inventory control is complex and takes a lot of time and energy to get right. Luckily, there are some best practices that help make the process easier and more reliable.
Here are the best ways to control inventory:
Conduct a Risk Assessment:
Problems arise regularly in business, whether it is a sudden increase in sales, lack of cash, insufficient storage space, incorrect inventory calculations, slow production, or discontinued products. Organize a risk assessment matrix to determine your worst risk and how to treat it when it occurs.
Supplier Relationship Management:
It is important that supply chain relationships are well managed, as you can often lead and work closely with suppliers to resolve issues. For example, a supplier may offer your company negotiable minimum orders, discuss unsold products, and help you quickly replenish inventory when you sell for a particular product.
Perform an inventory audit frequently:
If you do not know the proper level of your inventory, you will not be able to manage them. It should be inspected regularly to make sure your current levels and reports are the same. One way to minimize the amount of time spent is to calculate the inventory cycle every few days. Here, your staff checks certain products to make sure the reports are accurate. This saves time and is best used for your most valuable product.
Choose a management improvement methodology:
Management improvement methodology means more than inventory control. You can improve your business with management techniques such as s Kaizen, Lean, and Six Sigma.
Improving the purchasing process:
An important part of proper inventory management is to ensure that data and forecasts are used to manage the purchasing process. This includes reviewing customer needs by identifying goods, eliminating outdated inventory, and adjusting warehouse security and order items.
Selective inventory controls (forecasts):
Many methods are included in selective inventory controls or forecasts, such as ABC analysis. In this analysis format, you categorize inventory according to one of the following lists: cost of use, source of purchase, purchase problems, season, unit price, and level of consumption. Choose a formula based on the relative importance of each estimate and how much it affects stocks.
Monitor the data:
If you’re properly monitoring inventory levels, sales, and demand trends, then you have everything you want to get the most out of your inventory. Regularly evaluate the data and set up patterns that exhibit what you ought to stock and when. Investing in an order management system can additionally help discover patterns that have an effect on your shipping and delivery. You additionally keep an eye out for issues with inventory shrinkage or waste.
Set up par levels:
A product’s par level is the minimum number of products you need on hand to meet customer demand. You must set up a par level for each product you promote so you can avoid running out of stock and missing sales.
IMPORTANCE OF INVENTORY MANAGEMENT
Inventory management is an important part of all business operations and has a significant impact on their profitability.
Here are four key reasons why you should manage your inventory:
Increase sales and reduce losses:
By eliminating unwanted products and having safe stocks, you can always be ready to meet demand and make money.
Improve inventory efficiency:
Your product may not be in stock, which may take longer than it should in selection and packaging. Inventory control allows you to detect and fix this and many other issues, such as incorrect SKU numbers, in an effort to improve the process.
Establish accurate inventory count:
Improper inventory count causes headaches and increases costs. Inventory control gives you an idea of inventory numbers and helps you redefine sales points and trends.
Ensure customer satisfaction:
Customers hate when products are not available. Controlling your inventory avoids these problems and makes your customers happy.
Inventory Control Systems
Not all inventory control methods are good for every business or for different stages of the organization’s growth and development. Some approaches are very complex, especially for small businesses. You need to be able to use your system to track stock levels, create orders, and send out stock. Some basic inventory tracking systems include:
Whether with a ledger or stock books, manual inventory with pen and paper is an easy way to keep track of what comes in and out. Small businesses with many elements can get rid of this type of system. This system can be complicated because it is a convenient log that you cannot extract and use for planning purposes.
Many companies, specifically small businesses, use spreadsheets to track inventory. Whether they are Microsoft Excel or something similar, spreadsheets are a way to begin coding, you can make sure that you have on hand modern inventory levels and statistics. Businesses quickly personalize these systems to meet their needs.
A slightly more complex method makes use of stock cards, also referred to as bin cards. A stock card is a table that documents the running unit price, sales price, and inventory count of every product. The system additionally tracks purchases, sales, returns, and other motives to withdraw stock, such as any problems related to the item. For a stock card to be effective, steady updates are critical. You must also document unusual pulls; otherwise you run the chance of inaccurate data.
Basic Inventory Software:
Simple inventory software generally low-cost and focused on small and medium-sized businesses. This easy automation is frequently cloud-based and ties into your point-of-sale software, so it can generate real-time, computerized inventory updates. You can also include analytics and reporting of running cost comparisons, creating reorders, identifying best and worst-selling products and itemization of the order details or customer patterns. Some easy inventory management software systems can scale to extra complicated performance as your business grows.
Utilizing these Methods
With perpetual inventory control, all inventories is tracked in real-time with the use of inventory management software. This gives you access to the most accurate data at all times but is extra costly than manual counting.
The key to effective stock control methods is finding a balance between controlling costs and being able to meet customer demand. If your inventory control techniques decrease the cost but lead to issues with useless inventory or back-ordered products, it is not effective.
Some years ago, inventory management was a nightmare. This is because the businesses have started the use of inventory management software program which comes with in-built and automatic inventory control techniques. The inventory management software is smart enough to know the net stock, shortfall, and volume of inventory to be ordered. More importantly, information is accessible easily at a click which allows the businesses to take timely decisions.