Inventory control is an integral part of most businesses. Stock control practice is so important because it balances the cost of holding inventory against the risk…
Inventory control is an integral part of most businesses. By inventory control, we mean managing your inventory or stock from when it arrives in the company’s warehouse to the time it leaves. Stock control practice is so important because it balances the cost of holding inventory against the risk of running out of stock while maximizing the efficiency in using inventory.
What is inventory control?
Inventory control has to do with the section of your inventory management system that involves stocks currently at hand. Proper control is efficiently managing where your stock is and in what condition it is stored. Inventory management begins when stocks are offloaded to your warehouse to the moment it departs from your warehouse.
Difference between inventory control and inventory management
Without paying much attention, inventory control and management may appear to be the same thing. While they are closely related, inventory control is different because it ignores all other factors that classify as inventory management. These other factors include purchasing production sales and reporting. In other words, inventory control is just one part of the inventory management system. However, it is a very important part.
Does my business need inventory control?
Are you sure inventory control isn’t something you should be focusing on? In answering this, you need to know whether or not your business handles stocks. In summary, any business that comes in contact with stocks will need this of some sort.
However, there are different degrees to how much you will need. How important inventory control is to your business is usually determined by how important your products are to your business’s success.
Here are some business categories that need inventory control:
- Wholesale distributors
- Food/ beverage producers and brewers
If your business falls under any of these categories, then you need to start considering inventory control.
What does inventory control cover?
Inventory control doesn’t just mean organizing finished goods waiting to be shipped out. Your inventory control has to do with any material or ingredients that you need to sell your products. as a manufacturer, for example, you will have to include the raw materials used up for production in your inventory control. You will also have to include the components used. That is because these materials are either used up or play certain roles in creating the finished goods.
Why should stock control matter?
1. Your inventory is the backbone of your business.
To ensure you have low costs and high profits, you need to have full control of your inventory. Once a business should lose sight of their stock, their productivity begins to suffer. With control, stocks move smoothly, ensuring that your business is set up in a way that staff can assemble and send products to customers as quickly as possible and with minimal issues.
On the other hand, when you have badly managed goods, the company losses sight of what their stock is, how much inventory they have available, and what they can currently sell.
2. Reducing holding cost
Holding cost refers to how much you spend in storing your inventory. This refers to the air conditioning unit, the warehouse, the electricity bill, and every other penny that goes into ensuring that your inventory is stored properly. Storing inventory costs money, and when not controlled properly, your inventory can end up costing you more than necessary.
This makes maximizing the efficiency of your holding cost a necessity. A company with a tight grip on its stock can do amazing things with its limited stock on hand. This means they have to spend less on storage but still derive maximum profit from these goods.
They will also have a good sense of when to reorder stocks so that they can maintain a low level without falling into the stockouts zone.
3. Shortage costs
A business picks up shortage costs when they run out of stock to meet the demands of their clients. At this point, the company experiences a decline in the activities of its staff (idle staff). Its equipment begins to collect dust, and they begin to experience other complications that come with shortage costs. All these are pilled on the opportunity cost of any lost sales due to the lack of available stock. With better inventory control, your business is bound to experience fewer stockout or none, which lowers or, in some cases, eliminates shortage costs.
For start-up businesses with simple stock needs, attaining optimal inventory shouldn’t be difficult; however, every business has its unique challenges. To secure the future of your business, the earlier you begin practicing inventory control, the easier it will be when you join the fortune 500 companies. As you grow, the more parts you add, so by starting simple, inventory control wouldn’t be an alien practice when you need it the most.
Inventory control best practices
There is no “best” method or way to control your inventory. As there are many categories and differences in business, different approaches and models of inventory control need to be developed. Choosing the best practice depends on your business’s unique needs. With that being said, it becomes easy to identify businesses that have proper control over their inventory and businesses, which are still finding their footing.
Here are three things to aim for:
1. Already set procedures and policies.
Perhaps the easiest way to control your inventory is to set up policies and procedures on how the inventory should be handled. By ensuring that everyone in the business follows these policies and procedures, you are likely to experience better inventory control. By establishing policies and procedures, it becomes easier for your staff to work in sync as they all know what is expected of them. You can also reduce how much resources get wasted, take better stock of your inventory, and facilitate a smoother flow of stock.
2. Knowing everything that goes through the door
Sometimes, inventory leaves the warehouse without being allocated as a sale. For instance, products can leave the warehouse as donations or because they have been damaged. Failing to record these departures properly means they end up as lost goods, which affects the final invoice.
3. Being proactive
Companies that have mastered inventory control tend to think ahead. Instead of waiting for a problem to arrive before they fix it, they usually think ahead and watch out for improvements they can make to their systems. By using new technologies such as RFID, and barcode tracking, keeping stock organized is easier and more reliable.
What is an inventory management system?
Your inventory management system simply means the method or way you manage your inventory. There are two main ways of recording stock movements, namely: Manual inventory control and automated inventory control.
– Manual inventory control: this form requires you to take a record of stock manually.
– Automated inventory control: here, you use a dedicated software to track and organize your stock using cloud technology.
Improving your inventory control
Here are three top tips to get you started.
– Correctly classify products: consider classifying your products into an easy to understand and user-friendly system.
– Consider warehouse management: you can also improve the effectiveness of your warehouse and its staff. You should be using inventory management software.
– Improve your supplier relationship: your supplier has a significant impact on your inventory control strategy. Learn to build a strong relationship with all your suppliers if you want your business to run smoothly.
Ricemill helps you keep your level of stock as low as possible while ensuring you do not run out of stock. By using Ricemill, you ensure that your warehouse doesn’t cost you more money while you make the most profits.
Our software is particularly designed for Aussie retailers who want to make the most of their inventory. As a small business owner, our software has been designed to help you stay ahead of your competitors, saves you time, and increases your efficiency when you sell on multiple channels.
Get our software today and experience that helps your business grow and keep your clients happy.