If you don't take control over your inventory, your inventory will control you.
The success of your business depends on how you purchase, store, sell, and deliver your inventory. Dedicating time and resources to this process is vital to long-term growth.
We'll help you understand what inventory control is, why you need it, and give you the tools to do it yourself.
Inventory Control Definition
Inventory control is the process of maintaining a business's stock level to meet customer demand and minimize costs. This involves inventory tracking and maintenance of goods. It also includes making decisions to get the most profit out of your stock and planning purchases.
Example of Inventory Control
Inventory control can feel like an overwhelming task, but it doesn't have to be. Here's an example of how it can work.
Let's say that you're an inventory control manager and you discover that you have a batch of products on hand that aren't selling. This dead stock takes up valuable space in your inventory and is nearing the end of its life cycle.
As an inventory control manager, you need to find a way to turnover these products. One option would be to bundle them with more in-demand products in a subscription box using a subscription box platform. This is known as product kitting, and is just one of many options open to you when practicing inventory control.
Synonyms for Inventory Control
There are many different terms for the process of inventory control. Here are just a few you may come across in your travels:
- Inventory management
- Stock management
- Control of goods
- Material control
- Stock keeping
- Assets management
- Stock control
- Warehouse management
The Primary Objectives of Control Over Inventory Are Twofold
The two primary objectives of inventory control are safeguarding the inventory from damage or theft and reporting inventory in the financial statements. These are accomplished by using a variety of control methods to maintain and turnover inventory each day.
Purpose of Inventory Control In a Warehouse
Inventory control is the most important aspect of warehouse management. It ensures the warehouse operates smoothly while keeping costs low and meeting customer demand. Every aspect of stock must be tracked and this data can be used to make a variety of decisions.
The Application of Inventory Control
Applying inventory control in your business requires investing time and money into inventory management. This can be done by purchasing inventory management software or by manually taking inventory. Either way, you can apply the information gained by looking at inventory levels and trends to plan for purchasing, controlling, and shipping goods.
Important Considerations in Inventory Control
There are four major considerations for businesses looking to take control of their inventory. These considerations will help determine the best control methods and inventory management programs to use.
- Inventory analysis and purchasing. Inventory must be tracked and evaluated regularly to ensure your supply can meet demand. It also advises the manager on what and when to replenish stock.
- Product distribution. The ways products are categorized for distribution can make recording inventory much easier. This can also allow you to discover discrepancies like dead stock more quickly.
- Production evaluation. Production costs and efficiency need to be considered regularly for any manufacturer. This will let you make any necessary adjustments and increase sales.
- Tracking and inventory forecasting. Inventory tracking and forecasting will ensure you can meet demand and avoid issues like backorders. This is done through the creation of algorithms and constant vigilance.
Inventory Control Function
Inventory control is closely associated with the function of purchasing. Ordering products, storing, and maintaining them are the main goals of any inventory control manager.
Why Do We Need Inventory Control?
Inventory control is a vital part of any business's operations and has a major impact on their ability to make a profit.
Here are four major reasons you need inventory control:
- Boost inventory efficiency. Your products may be all over the warehouse making picking and packing take much longer than needed. Inventory control lets you discover and optimize this and many other issues to increase efficiency and streamline your processes.
- Ensure accurate inventory counts. Inaccurate inventory causes headaches and increases cost. Inventory control gives you insight into inventory numbers and helps determine reorder points and sales trends.
- Increase sales and mitigate losses. By eliminating undesired products and keeping a buffer stock, you can always be prepared to meet demand and make money.
- Ensure customer satisfaction. Customers hate when products are out of stock or on backorder. Controlling your inventory lets you avoid these issues and keep your customers happy.
Why Is Inventory Control Important to Managers?
Storing inventory has many associated costs that a manager needs to keep under control. Without inventory control, a business's warehouse can quickly become a problem. By allowing inventory to move about with no interference, a manager risks running into skyrocketing costs and plummeting profits. This in turn will lead to the loss of their job and possibly the closure of the business.
Inventory Control System and Software
One of the best ways to take control of your business's inventory is to invest in inventory management software. This software tracks inventory levels, sales trends, and inventory cycles. There are many options on the market with a variety of capabilities and additional tools.
Most of these programs can be tied to your POS system to provide a perpetual inventory count. This updates your inventory levels each time a sale is made. This lets you make the most informed decisions and calculate optimal reorder points, plan for product lead time, and more.
Automated Inventory Control
Automated inventory control takes a perpetual inventory count to the next level and makes decisions using a set of predetermined rules. This feature is built into some of the best inventory control software and allows you to take a more hands-off role.
Here's an example of how this automatic inventory control can work. If you have a particular product that you always want to keep in stock, you may set a minimum supply threshold for reorder. Once you hit this number, the system automatically sends a new purchase order to your manufacturer. Paired with the optimal economic order quantity and you can optimize this process.
Inventory Control Sheet
An inventory control sheet is a spreadsheet containing information about the goods in your inventory. This generally includes inventory levels, storage capacity, order and reorder dates, and unit prices. There are many other variables that may also be tracked depending on a business's inventory model. Many inventory management programs come with built-in control sheets.
Inventory Control Template With Count Sheet for Excel
Inventory control can be made much simpler by using an Excel spreadsheet. You can track your inventory levels, value, and length in storage. This will let you determine the best ways to optimize your inventory usage.
To help make things easier for you, we've put together a simple inventory control template spreadsheet. Just download the inventory control template, add in your own data, and begin taking control of your inventory!
Taking control of your inventory can pay dividends with just a little effort. By following the steps above and using our inventory control spreadsheet, you can make your inventory work for you.