Are you struggling to keep track of your inventory? Do you find yourself with too much stock on hand, or not enough to fulfill customer orders? If so, you may need to improve your inventory control system.
What Is Inventory Control?
These systems involve the process of monitoring and managing a company’s inventory to ensure optimal levels of stock on hand. The goal of inventory control systems is to minimize costs while maintaining sufficient inventory to meet customer demand. It involves tracking inventory levels, forecasting demand, and making informed decisions about ordering, stocking, and shipping products.
Why Is Inventory Control Important?
Accounting Accuracy
Effective inventory control ensures accounting accuracy by providing a clear understanding of a company’s inventory levels. When these numbers are accurate, companies make more informed decisions about purchasing, stocking, and shipping products. And when maintaining precise inventory records, businesses can calculate the amount of goods sold, gross profit, and net income accurately.
Organizational Control
Inventory control techniques such as cycle counting and ABC analysis provide organizational control, allowing businesses to efficiently manage their inventory levels. Proper inventory control practices, including the use of safety stock and reorder points, ensure businesses have enough inventory on hand to meet customer demand while avoiding stock outs or overstocking.
Quality Control
By accurately tracking inventory levels, businesses can identify any discrepancies or quality issues, such as spoilage, expired, or damaged products. This helps businesses maintain their reputation for quality and avoid customer complaints, leading to increased customer satisfaction and loyalty. Implementing a Point-Of-Sale (POS) system and Just-In-Time (JIT) inventory systems are effective inventory control methods which ensure optimal movement of inventory throughout the supply chain. Investing in technologies such as POS systems and JIT inventory systems can help businesses achieve visibility into inventory levels, stock control, and enable timely replenishment of quantities as needed.
Challenges of Inventory Control
Human Error
Entering inventory data manually is time-consuming and can lead to mistakes, such as typos, incorrect quantities, or misplaced items. These errors result in incorrect inventory levels, leading to over or understocking, increased carrying costs, and lost sales. Implementing an effective inventory control system that utilizes barcode or RFID technology can help businesses reduce human error and maintain accurate inventory records.
Finding the Time and Resources
Implementing inventory control can be a time-consuming and resource-intensive process. Regular inventory counts, demand forecasting, and analyzing inventory data require time and effort, which can be a challenge for businesses with limited resources. Additionally, investing in inventory management software, such as Fishbowl, can help businesses streamline their inventory control system, saving time and resources in the long run.
Visibility
Lack of visibility into inventory levels can also be a challenge for businesses, especially those with complex supply chains or multiple locations. Poor visibility can lead to stockouts, overstocking, and lost sales, impacting customer satisfaction and profitability. Collaborating with suppliers and implementing effective purchasing practices, such as purchase orders, can help businesses maintain visibility into their inventory levels and avoid disruptions in their supply chain.
Inventory Control vs. Inventory Management
Inventory management is the process of overseeing the entire inventory system, from ordering and receiving products to storing and shipping them. It involves tracking inventory levels, forecasting demand, and making informed decisions about purchasing, stocking, and shipping products. The goal of inventory management is to maximize the value of the inventory while minimizing capital investment and improving cash flow.
In comparison, inventory control is a specific aspect of inventory management that focuses on ensuring inventory accuracy and reducing carrying costs. It involves monitoring inventory levels, conducting physical inventory counts, and implementing strategies to avoid overstocking or stockouts. The purpose of inventory control is to optimize inventory levels to achieve profitability and improve cash flow.
What Are Some Examples of Inventory Control in Practice?
Periodic Inventory System
A periodic inventory system is a manual inventory control system that involves conducting physical inventory counts at regular intervals, such as weekly, monthly, or quarterly. This method allows businesses to compare the actual physical inventory levels with the recorded inventory levels and identify any discrepancies. The periodic inventory system is often used by small businesses with low inventory turnover and a limited number of products.
Retail Operating System
A retail operating system is a computerized inventory control system that is specifically designed for retail businesses. It allows businesses to track inventory levels in real-time, monitor sales trends, and automatically reorder products from suppliers when inventory levels reach a certain threshold. The retail operating system also allows businesses to analyze sales data and make informed decisions about pricing, promotions, and product placement. Collaborating with suppliers and manufacturers can help businesses optimize their inventory control system and achieve profitability.
Perpetual Inventory System
A perpetual inventory system is a computerized inventory control system that tracks inventory levels in real-time. It uses barcodes or RFID technology to scan items as they are received, sold, or transferred, and updates the inventory records automatically. The perpetual inventory system allows businesses to maintain accurate inventory records and avoid overstocking or stockouts. Collaborating with suppliers and implementing effective purchasing practices, such as the JIT inventory system, can help businesses optimize their inventory control system and improve profitability.
Spreadsheet to Control Inventory
A spreadsheet is a simple and inexpensive inventory control tool that can be used by small businesses with a limited number of products. A spreadsheet can be used to track inventory levels, monitor sales trends, and reorder products when inventory levels reach a certain threshold. However, spreadsheets can be prone to errors, and they do not provide real-time inventory tracking or automatic reordering, making them less efficient than other inventory control methods.
Effective Inventory Control Process Tips to Take Advantage Of
Implementing an effective inventory control process is crucial for any business that deals with physical products. Here are some tips and tricks to help optimize your inventory control process:
Be Consistent With Your Labeling System
Use a consistent labeling system to help identify products quickly and easily. This can include using barcodes or QR codes, which can be scanned to update inventory levels and reduce the risk of manual data entry errors.
Use Real-Time Inventory Tracking
Implement a real-time inventory tracking system that allows you to monitor inventory levels in real-time. This identifies inventory discrepancies quickly and helps with reordering decisions. Inventory control software, like ShipHero, can help businesses track inventory levels, manage SKUs, and fulfill customer orders efficiently.
Set Reorder Points
Establish reorder points for each product based on their sales history and lead time. This will help you avoid stockouts and overstocking and ensure that you always have enough stock to fulfill orders. By categorizing products into different areas or locations, businesses can easily view the inventory levels and set reorder points for each category.
Back-up Your Data
Regularly back up your inventory data to prevent data loss in case of a system failure. Consider using cloud-based inventory management software to store your data securely and enable remote access to your inventory records. This can also help businesses optimize their supply chain management by providing access to inventory data for multiple vendors and destination points.
Perform Regular Audits
Conduct regular physical inventory counts to identify any discrepancies between the actual physical inventory levels and the recorded levels. This can help you identify any issues with your inventory control process and take corrective action to improve accuracy and efficiency.
Inventory Control Systems You Need to Know About
Inventory control systems are crucial for any business that deals with physical products, and there are many different types of systems available. One such example is ShipHero’s Warehouse Management Software, which offers a comprehensive solution for inventory management, order fulfillment, and shipping. This cloud-based software provides real-time inventory tracking, automated replenishment, and detailed reporting and analytics to help businesses make informed decisions about their inventory levels.
Key Takeaways
Imagine a world where businesses didn’t manage their inventory. Chaos would ensue! Products would pile up to the ceiling, or worse, disappear into thin air. Customers would be left with empty shelves, or they’d be bombarded with too much stock. That’s where inventory control comes in! It’s like a superhero that swoops in to save the day, preventing businesses from drowning in their own products. Sure, there are challenges, like human error or lack of resources, but with real-time inventory tracking, setting reorder points, and regular audits, businesses can become inventory control superheroes themselves. And for those who want to take their inventory management to the next level, ShipHero is ready and able to join the fight against inventory chaos.
Inventory Control FAQs
What Is Basic Inventory Control?
Basic inventory control is the process of monitoring and managing the quantity and location of products or materials within a business. It involves tracking inventory levels, forecasting demand, and making informed decisions about ordering, stocking, and shipping products. Basic inventory control aims to ensure optimal levels of stock on hand while minimizing costs and avoiding overstocking or stockouts.Â
What Is FIFO and LIFO in Inventory?
FIFO and LIFO are two common inventory costing methods used in accounting. FIFO stands for “first in, first out,” which means that the oldest items in inventory are sold first, and the cost of those items is assigned to the cost of goods sold. LIFO stands for “last in, first out,” which means that the most recent items added to inventory are sold first, and the cost of those items is assigned to the cost of goods sold.Â
What Is Good Inventory Control?
Good inventory control is the process of effectively managing and monitoring inventory levels to ensure optimal stock levels, minimize carrying costs, and maximize profitability. It involves accurately tracking inventory levels, forecasting demand, implementing efficient replenishment processes, and utilizing inventory control systems and tools. Good inventory control also requires regular audits and analysis of inventory data to identify opportunities for improvement.Â
