What methods do you employ to keep track of your inventory? Do you have a system for inventory management and control? You're not making the best decisions for your inventory if you don't know the answers to these questions. Unfortunately, this means you're spending more money on storage while earning less.
Adopting innovative inventory management strategies can assist you in reducing waste and focusing on the growth of your company. We can show you how to manage your inventory and some of the best tools to utilize, and the advantages you can expect. It's a crucial aspect of our inventory management guide.
What Is Inventory Control, And How Does It Work?
Inventory control, often known as stock control, ensures that an organization has the proper supplies on hand. The approach guarantees the organization can satisfy customer demand and provides financial elasticity by implementing appropriate internal and production controls.
In other words, Inventory management is the practice of lowering inventory expenses and increasing your ability to meet consumer demand. This can be accomplished by various inventory management techniques, such as eliminating deadstock (see definition of dead stock) or utilizing the reorder point formula to calculate an ideal reorder point.
The most crucial aspect of inventory management is that it necessitates a focused inventory tracking emphasis. You can manually take inventory or invest in an inventory management system. Inventory control allows you to make the most money with the least inventory quantity while maintaining customer happiness. It will enable businesses to examine their present financial situation regarding assets, account balances, and financial reports when done correctly. Inventory control can assist you in avoiding issues like out-of-stock (stock out) situations. Walmart, for example, projected that it lost $3 billion in sales in 2014 due to insufficient inventory control methods that resulted in stock outs.
Inventory Control Procedures
Inventory management necessitates the creation and implementation of a simple set of procedures. Once in place, these procedures reduce the risk of mismanaging your inventory and should be included in any warehouse manager's résumé. It would help if you first comprehended the phases that stock goes through before designing your plan.
Inventory Management Process Steps
All inventory plans are based on the eight steps of the inventory management process. These are the steps to take.
1. The product will be delivered to your location. This is the point at which goods join your inventory for the first time.
2. Inspection, sorting, and storage are all done on the product. It depends on the storage capacity you have; you can use cross-docking, dropshipping, or another approach for this.
3. Inventory levels are kept track of. Physical inventory, inventory cycle counts, or perpetual inventory software can all be used to do this.
4. Orders are taken from customers. Customers can buy from you in person or through your online business.
5. Orders from customers have been approved. In your POS system, this is most likely an automatic operation. If you're using dropshipping, this is the point at which you send the order to your supplier.
6. Products are taken from the warehouse. These items are located using an SKU number, packaged, and sent or delivered to the consumer directly.
7. Inventory levels have been revised. Your stock levels will be changed automatically by perpetual inventory software. When you take a physical inventory, you may also manually record each sale or find modifications.
8. Stock levels trigger reordering. Calculating your reorder point for each product you sell will help you streamline this process and ensure you have the inventory you need to satisfy demand. The just-in-time inventory approach includes this as a critical component.
How Inventory Control Can Develop Your Business
Implementing adequate inventory control systems can aid in ensuring a company's financial health and that its products satisfy the needs and expectations of its customers. Global State of Multichannel Customer Service Report says," 62 percent of customers have abandoned a brand due to bad customer service. Frustration over out-of-stock or back-ordered items is at the top of the list of customer care complaints.
According to convenience shop studies, out-of-stocks can cause a business to lose one out of every 100 customers. Furthermore, when their preferred item is out of stock, 55 percent of buyers in any store will not purchase a substitute. Other areas where inventory control procedures and approaches could help firms save money or make more sales include:
- Stock that is no longer alive
- Costs of excess storage
- Sales are down.
- Customer loyalty is eroding.
- Excess inventory
- Inventory is getting out of hand
- In the warehouse, products are being misplaced.
"Owners of small and new businesses would be stunned to see how much help they can get and how much money they can save by wisely managing their inventory," says David Pyke, co-author of Inventory and Production Management in Supply Chains, now in its fourth edition and professor of operations and supply chain management at the University of San Diego. Many small firms are cash-strapped, with much of their capital locked up in inventory. In the most efficient way possible, good practices balance client demand and inventory management." Source
Inventory Control With: 11 Expert Tips
For some firms, thoroughly investigating the subtleties of inventory management methods and theory may be too much. The following points can help you in determining what you need to accomplish before deploying a new inventory control system:
Critical Components To A Successful Inventory Control Strategy
It's not enough to buy a software solution that manages your inventories. A robust inventory control plan covers all aspects of your orders, from production to purchasing to selling and finally eliminating them from your records. Reducing wasteful warehouse space, buying supplies using a forecasting formula, and establishing vendor relationships should all be part of an inventory control program.
Plan First, Then Act
Any sane manager will tell you that inventory management and control are ongoing processes that do not end at the warehouse. It would help if you kept your plan up to date and then put it into action. It would help if you were collecting data and updating your estimates for the coming months every week, as well as making any necessary changes to your inventory management plan. It's also possible that world events will force you to alter your inventory management strategy.
Ensure You Have Critical Stock On Hand At All Times
Determine which stock is crucial, whether it's machine components or an item that drives sales, and make sure such things are never out of stock. You should have an inventory control system in place for this.
Examine All Shipments
When your company receives an item for the first time, it is a critical source of inventory loss. Examine the packing slips and merchandise for any signs of damage.
Members of the Inventory Management Team Should Be Appointed
Staff buy-in is essential, but make sure the people in charge of inventory control are the proper people for the position. Math should be one of their strong suits, and they should be given ample time to do the assignment correctly. Your inventory management team should ideally comprise employees involved in every stage of the process, from warehouse managers to procurement specialists to floor pickers. Smaller companies should consider including all managers as well as certain front-line employees.
Like Inventory Should Be Grouped in the Same Regions
As feasible, group like inventory in the same areas. Furthermore, unique products should be stored in a specific area.
Find a Happy Medium between Inventory Costs and Stock-On-Hand Benefits
Finding the correct balance between the expense of manufacturing and keeping goods and avoiding stockouts is critical to developing a successful inventory control system. Unfortunately, your company's funds are invested in that stock. Fortunately, knowing your organization well enough will allow you to select the appropriate approaches and forecasting techniques. You're trying to figure out your entire stock cost, including things like warehousing and perishables, and then balancing that against demand and the cost of stockouts to find the correct balance.
Examine Other High-Level Plans
If you don't have complete control over your inventory, you should probably look at other aspects of your firm. For example, do you have a quality management strategy in place? Have you recently reviewed your facility management strategy?
Select a System That Can Scale
Small firms may be tempted to acquire one-size-fits-all software systems or, on the other hand, free or low-cost software systems. Cloud-based systems can scale with a company and deliver the analytics you need to keep it growing.
Your processes can only be as good as your software
Software can't fix faulty processes; it can only automate them.
Have a Backup Plan
Regardless of how sophisticated the software is or well-thought-out the procedure, make sure your company has a backup plan in case of power interruptions or theft. A cloud server is always preferable to a local server.
Methods Of Inventory Management
Tracking each product is one of the most critical things you can do to monitor and manage your inventory.
The following are the most prevalent inventory tracking methods:
Physical Counts Are Performed Every Month
Manual inventory counting is the most time-consuming and inefficient method of inventory tracking. All operations must be halted, and teams must be formed to walk through your warehouse and account for all merchandise. This data is kept track of in either a specific application or an excel file. While this strategy is a fantastic place to start, it might become unduly cumbersome as your inventory grows.
Counting The Inventory Cycle
Cycle counts are similar to inventory counts in micro. However, rather than counting all of your products manually every month, you merely count the most valuable ones every few days. This helps you keep a closer check on the goods most vital to your company and respond more swiftly if there is a problem. It also allows you to count inventories without shutting down the business. However, because you won't know your overall inventory levels, it should be used with another inventory tracking approach to get the most out of it.
Using Inventory Management Software
Investing in a perpetual inventory management system is the best approach to keep track of your goods. This program is updated automatically anytime products are delivered, sold, or deemed lost or destroyed. As a result, you'll always have the most up-to-date inventory count at your fingertips, which will allow you to adapt your strategy and satisfy client demand before any problems arise. Because there is a considerable amount associated with it, the only real disadvantage is additional.
Various Inventory Management Techniques
The four major inventory management devices are ABC inventory analysis, economic order quantity (EOQ), safety stock, and reorder. These gadgets ensure that your inventory of items is sufficient to meet customer demand. They each have their advantages; it depends on the type of business you run. Here's a quick rundown on each one.
The ABC analysis determines the worth of all of the items in your inventory. This allows you to reallocate resources and focus your efforts on the essential items to you. EOQ is an inventory model that calculates the best order quantities to save money on storage. Buffer stock is an extra supply of things that you keep on hand in case of demand spikes unexpectedly. Reorder points are the exact moments when you should reorder products to meet demand while not storing excess inventory.
Inventory is the most important asset in your company; you must protect it and nurture it to save money and make more. If you don’t apply inventory management strategies, you will never get ahead. The best way to gauge how well your business is doing is by taking a look at what's currently on hand or "In-stock". This number should always be as high as possible because that means there are products being sold which equals cash flow for an increase of profit margins!
With Conveyr's software, we can help simplify all aspects of inventory control so that even if demand spikes during peak season, your team will have everything they need to keep up with change. So stop worrying about having enough items in stock - let us handle your inventory management.