Inventory Control And Why It Must Matter
Inventory control is something that all business owners and merchants have to be aware of. Breaking it down to its base level, inventory control refers to having greater oversight of your inventory.
Sometimes known as internal control or stock control, inventory control is often setup in accounting systems to manage and protect your assets. The more assets you own, the more important control over those assets become, but it’s always important.
Inventory Control Exercises, Terminology And Definitions
There’s a number of different levels, exercises and definitions that fall under inventory control. Here’s the ones we recommend you focus on and get familiar with.
- Reorder Point – One of the key pillars in successfully controlling inventory is knowing when to reorder products/materials. This is called a Reorder Point. When reorder points are set to a low level, it keeps the investment of inventory low too but at risk as you may experience a stockout. If you’re out-of-stock, you’re losing sales. You can adjust reorder points as needed until you get it right, but make sure you’re using reorder point formulas.
- Bottleneck Enhancement – When you get into the product process, there’s always some type of bottleneck that interferes with your output. Inventory control can be implemented as a buffer to ensure the bottleneck can continue running despite problems elsewhere.
- Raw Materials Availability – For those of you that rely on raw materials, controlling that inventory is key to ensuring the process is producing finished product. This inventory control strategy involves ordering small inventory lots from suppliers, which can be a challenge. Many suppliers are not willing to do this, so you may have to outsource to ensure this process is efficient as possible.
- Finished Goods Availability – Having finished products on-hand can increase the value of those products if you have the ability to get them to customers quickly. While it can fetch a premium, it can also be a big investment on your part keeping so many finished products on-hand. This process is a delicate balance to make it worthwhile and profitable. This may incorporate the use of a just-in-time manufacturing system, which only produces goods for certain customers.
- Outsourcing – You can also outsource inventory control to suppliers. While you can’t expect them to do it for free (yeah, they’ll charge you) it can lift the burden off you of having to control inventory on your own.
What’s The Difference Between Inventory Management And Inventory Control?
At first, one would think inventory management and inventory control is two of the same. While there’s a little truth to that statement, these two are completely different and they refer to different things. Let me explain.
Inventory Control – This involves warehouse management, it’s a series of processes we in order to manage a warehouse.
- Tracking all warehouse items – knowing what products go where, knowing how many products are in stock, how many are on the way, an accurate accounting of the warehouse inventory.
- Involves the design of a warehouse – ensuring quick selling items are close to pickers, storing all products in the most efficient way possible, things to that nature.
Inventory Management – This involves different elements not relative to inventory control, such as;
- Knowing your Reorder Point for all products
- Paying the correct amount for incoming inventory
- Stocking the right quantity of a specific product
While the two closely relate in certain areas, the two have different purposes and roles.
Why Inventory Control Is Important
You have decisions you need to make daily, knowing what you have in real-time is important for the success of your business. When you have a lot of moving product, that can be a challenge if you don’t have the right order management software to manage your inventory.
At a moment’s notice, things can happen that forces a decision now versus later that can forever shape your business for the better, or for the worse.
For any seller, ecommerce merchant, business owner, knowing where your inventory is at all times is important. You need to make sure you know what you have in inventory, you need to know what’s in the warehouse and you need to know when stock is moving (up or down).
You can also rely on inventory control systems for assessing your assets, providing financial reports or to balance your accounts. Inventory control is important to maintaining the right amount of products in the warehouse. No company wants to lose sales because they can’t fill an order.
When you have control over your inventory, you’ll be able to provide a high level of customer experience. Poor inventory management can drive your customers to other suppliers. Inventory control is the answer to keep your customers coming back for more.
How To Control Your Inventory
There’s a number of ways you can control your inventory.
Order management software that includes inventory management is one of the most efficient and cost-effective ways for maximum inventory control.
While there’s nothing wrong with using spreadsheets, it’s going to cost you time, money and effort to do so. Human errors are real and while software can make errors, inventory management software is very accurate.
Inventory management is just one arm in the fulfillment process that you need to control. If you’re outsourcing your fulfillment, it’s important to choose a fulfillment provider that can integrate with your ecommerce software.
Having multi-channel integrations that can be added seamlessly will always be important to the overall success of your business.
How To Effectively Control Inventory
Since controlling your inventory is such a big key to success, here’s a few more ways you can control inventory on an effective level.
- Know your Reorder Point Formula
- Always keep your stock organized (you know what I’m talking about!)
- Use the right Order Management Software
- Make sure SKUs are being used and easy to understand
- Try using Batch Tracking software
Inventory Control Challenges
Managing your inventory can be a challenge, especially for those of you that have to manage thousands, if not tens of thousands of products.
One of the biggest challenges of controlling inventory is deciding how much inventory you need to order. You want to keep an adequate amount of inventory on hand to meet your customer’s demands at all times. Sure, things will happen, but you already know what the goal is, how do you deal with the challenge itself?
Your best weapon is inventory forecasting.
If you don’t have that in place right now, get it implemented, it will make a huge difference.
You’re losing sales and revenue when your products are not on shelves or available for shipment.
Wrapping It Up
Bottom line, inventory control is a core pillar of your business. Without it, it’s near impossible to make the proper adjustments and decisions moving your business forward.
Knowing your numbers is key to business growth and strategic planning.