What it Means to Optimise Inventory Control

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Effective inventory control starts with knowing exactly what stock you have and expertly managing that stock to achieve the greatest benefit and financial return for your business. Inventory optimisation can have a significant impact on supply chain performance, resulting in the reduction of capital tied up in inventory. In addition, optimising your inventory will improve your companies cashflow, help withstand market fluctuations and better adapt to any changes in consumer demand.

Have a strategy to establish optimal stock levels

Finding the perfect balance between supply and demand can be challenging for any business. What are the maximum and minimum inventory levels that the organisation requires to operate efficiently? How do you determine appropriate re-order levels, safety stock levels and an average inventory stock level the business needs to maintain customer service while helping keep costs contained?

Use any information you have on hand including sales, budget and forecast information, historic data, projected sales figures and current trends to determine optimal inventory levels. These levels should include the total inventory stock to be held, in store, in the warehouse and across multiple locations.

Formulate Budgets

Most companies will establish an annual inventory budget well in advance of procuring inventory stock for their business. These budgets should include the total cost of inventory, not just the materials cost. Total inventory costs will include fixed operational costs, holding costs, logistics costs and distribution costs. Plus, it will include any miscellaneous costs that contribute to the total ownership costs of your inventory.


The simplest approach to optimising inventory stock is to accurately record and monitor inventory data. To effectively do this will usually involve implementing an automated inventory management system to standardise and accelerate processes.

For a business to easily respond to market demand or supply chain disruptions, it needs a backward/forward visibility of the supply chain, to see what has and what is currently happening. This information will help to determine what is likely to happen in the future, improving forecasting and purchase decisions.

Automation will streamline your operations, increase efficiency and reducing error rates, to provide greater inventory control. The systems provide full visibility of inventory levels and most systems can be integrated to automatically notify suppliers when a demand for stock or services occurs.

The technology a company uses to optimise inventory will depend on the individual company’s specific needs and ultimately what the business is trying to achieve. Finding the right technology will depend on the nature of the business, range of products offered, size of the company, the type of industry and complexity of the supply chain.

Selecting a software solution needs to be carefully evaluated, however, systems that provide the flexibility to grow with your business could yield a greater return on investment.

Integrate and Review

Implement integration strategies to facilitate improved vendor management inventory, just-in-time replenishment and demand driven fulfilment. Integrating all areas of the supply chain, including data collection from both internal and external systems is necessary to achieving comprehensive inventory optimisation.

Technology and how we do business evolves over time, therefore, it is important to monitor and review inventory control procedures to measure the success of optimisation tactics. This revision will ensure their effectiveness and help create continuous improvement that demonstrates tangible results over time.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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