Having a product or multiple products that customers are eager to buy can be game changing for the success of your company. But you could have all the product demand in the world, and if you don’t have proper inventory controls in place, then you could be faced with a regular cavalcade of problems.
To ensure that your company is bringing in the most amount of profit possible, you want to guarantee that you work out any kinks with your inventory process. With this brief guide, hopefully, you will be able to move even just one step closer to achieving the most efficient inventory control process possible.
What Is Inventory Control?
Also commonly referred to as stock control, inventory control is simply the practice of regulating your business’s stock. The goal of inventory control is to ensure that profits are maximized through minimum inventory investment while customers are also thoroughly satisfied.
Depending on what kind of business you run, it could feel like you have more inventory than you know what to do with. But good inventory control ensures that everything in stock is accounted for at all times.
A major part of inventory control is accounting for warehouse stock. You want to be intimately familiar with the design of your warehouse and make sure that you not only know where everything is being stored but that you also take the steps to store your products properly.
Intimate knowledge of your warehouse is crucial for achieving proper inventory control.
Having The Best Inventory Control Procedures Possible
Inventory forecasting is one effective procedure to establish how much stock you actually need. Two effective formulas for proper inventory forecasting are the Economic Order Quantity formula (EOQ) and the Reorder Point (ROP) formula.
If you simply enter your annual demand, your carrying cost per unit, and your fixed order cost into a handy EOQ calculator, you will then be able to get a better idea of where the ideal order quantity intersects with customer demand while not going too over budget on inventory costs. A Reorder Point lets you know exactly when it’s time to order more stock. Calculate both your lead time demand and your safety stock in days, add both of these numbers together, and you’ll know when you need to order a product to avoid shortages.
Another effective inventory control procedure is having an alphanumeric Stock Keeping Unit (SKU) system in place. SKUs are essentially product codes that allow you track all of your products as precisely as possible. For example, if you run an online clothing company, the right SKUs will let you know how many sizes you have of a specific shirt and in what color. It’s important to note that SKUs only track available warehouse products and not products that have been ordered for restocking purposes.
Batch tracking is a third inventory control procedure that you should consider having in place. A batch is simply a set of goods that were produced together, and tracking those batches can let you know exactly how many products were shipped, where they came from, where they went, and, if applicable, when they expire. This system can help you implement effective recall if necessary and can also help you develop good relationships with suppliers.
Some companies still use Excel spreadsheets to implement these inventory control procedures, but it would probably be ideal if you invested in some sort of more advanced inventory management system. This will help to effectively expedite your inventory control process.
The Consequences Of Poor Inventory Control
If you do not have the proper inventory controls in place, then you could be opening yourself up to a plethora of problems. You could be spending money on items you don’t need, you could have items that are simply unaccounted for, you could be dealing with unhappy customers, and you could be wasting valuable time, resources, and manpower.
Improper inventory forecasting is one of the most common inventory problems that companies can run into. They either order too few products and have upset customers or order too many products and have an absolute mess of a warehouse. With that in mind, it’s important to not just simply execute inventory control strategies, but to implement them as efficiently as possible.
Your Inventory Control Process Should Be As Well-Oiled As Possible
When dealing with any inventory, organization is key. From knowing how much product you have in stock to being able to effectively communicate with customers, proper inventory control simplifies everything.
If there is one little snag in the system, it could set your back immensely. That’s why staying vigilant throughout the entire inventory control process, communicating with and working with the most qualified people, and using as many available tools you can to your advantage is required if you want your company to achieve maximum profitability and optimal growth.