Learn all about how to control the stock that you have on hand: a pivotal part of inventory management.
Inventory control is the portion of your inventory management system that involves what’s currently in stock. Essentially, it’s about effectively managing where your inventory is and what condition it’s in — taking when stock arrives and departs your warehouse into account. You may also hear it referred to as stock control.
At first glance, inventory control looks very similar to inventory management. While they are similar, stock control ignores all the other factors that make up inventory management: including purchasing, production, sales and reporting. So really it’s just one part of your inventory management system, albeit an important one.
For any inventory-based business, controlling inventory is important to maintain low costs and high profits. Because when businesses lose control over their stock, productivity will suffer.
When running smoothly, inventory control ensures that your business is set up in a way that enables staff to assemble and send products to customers as quickly as possible. With badly controlled inventory, you’ll lose sight over where your stock is, how much you have, and what you can currently sell.
There are two other key reasons for paying attention to stock control: reducing holding costs and shortage costs.
Storing inventory costs money, which makes maximising efficiency as much as possible important. A company with excellent inventory control can do more with what’s on hand, meaning they have to store less. They’ll also know exactly when to reorder products, meaning they can store exactly what’s needed without running the risk of stockouts.
Inventory shortage costs are incurred when a business runs out of stock: meaning employees are idle, your machines are under-utilised and more. And that’s on top of the opportunity cost of any lost sales due to lack of stock. Better inventory control means fewer stockouts, lowering shortage costs.
Stocktaking — when you count and record the inventory that your business has on hand — is an important part of inventory control. After a stock count, you should know exactly what inventory you currently own.
If the stock levels from your count differ widely from what the figures you have in your inventory management system, it might be a sign that your inventory control could be improved. Even if they don’t, having accurate information on your stock is a great start at improving efficiency.
How you control your inventory will depend on your chosen inventory management system. For small businesses with simple stock needs, a spreadsheet that’s updated whenever stock arrives or leaves might well be enough.
Many businesses, though, will require something more sophisticated. Tools such as barcode scanners, warehouse management systems and inventory management software will help streamline your inventory and increase efficiencies across your entire business, enabling you to:
This all becomes increasingly important as your business grows more complex. Ensuring that all your products are in the right place, for example, becomes much more difficult when you have multiple warehouses to manage.
There are lots of different ways to improve your inventory control. Here 3 top tips to get you started.
Categorising your products and components into an easy-to-understand, user-friendly system is a solid first step towards proper inventory control.
The methods for classifying inventory can differ from company to company, but there are a few common methods you can employ. The ABC method, for example, categorises items according to their value and documentation requirements.
Warehouse management is all about improving the effectiveness of your warehouse and its staff. Warehouse management software will often come with a flexible location system and customised categorisation for easy storage, movement and picking. Such a system will increase inventory accuracy while reducing cycle times and handling costs.
Supplier issues will often end up impacting your inventory control strategies. Building solid relationships with all your suppliers is imperative if you want your business to run smoothly — so make sure to review all your suppliers regularly to ensure the partnership is working for both parties. If you don’t think it is, it might be time to find a new supplier.
The best way of improving inventory control, though, is to get proper visibility over your stock levels and location. By tracking each one of your products from when it arrives in your warehouse to when it becomes part of a sales order, you can see where you can make improvements to your stock control. And if you know what your current stock levels are, you’ll know exactly when to reorder.
Perpetual inventory control — when your system is kept up to date of exactly how much stock you and have and where it is in real-time — is a great way of getting complete transparency over stock data. For a perpetual inventory system to function, though, you’ll need it to include purchases, production, sales and credits.
Find out more about how buying, making and selling products affects your inventory management.