Inventory control, also known as stock control, aims ultimately at ensuring that all inventory stocks and stock levels are monitored and kept enough to meet customer demands. Every item in the warehouse or inventory is included in the coverage of inventory control, from raw materials which are ready to use for production, work in progress which are stocks or goods pending completion in production, to finished goods which are ready for sale, and consumables like stationery and fuel. At all times, efficiency in inventory control process is necessary in order to ensure that right amont of stocks are available at the right time. This also eliminates the capital from being unnecessarily tied up.
Oftentimes, besides sorting inventories according to type, inventories are categorized further depending on their value and how they perform in the market. With which case, come time where capital is restrained, the management will have an easier task of identifying which stocks should be prioritized first for replenishment. Inventory items of greater value usually get to be more prioritized. And most likely, the nature and size of the business determine how much stock should be kept.
Inventory control methods have been introduced and are still being practiced for an efficient tracking of inventories. These include:
- First In, First Out – This method helps dispose perishable stock the soonest time possible just before they deteriorate. Basically, the stock is classified by the date when it was received and forwards through each phase of production in strict order.
- Just In Time – This method aims to reduce warehouse cost as much as possible through cutting and maintaining stock at a minimum. That means items are requested for delivery only when orders are up, or when they are needed and used right away. On the downside, this can pose a risk of stock-outs, hence suppliers have to be reliable enough that they can truly deliver the demands on time.
- Minimum Stock Level – This method is used when minimum stock levels are to be identified or taken into account to determine whether a product needs replenishment or otherwise.
- Stock Review – This method prioritizes reviews of stock on a regular basis. In every review, possible returns of stocks can be earlier carried out.
- Economic Order Quantity – Popularly known as EOQ, this method or formula is used to determine the balance between holding too little or too much stock. Because EOQ is quite complex to understand, a lot of businesses use stock control software instead while others use an advanced inventory control system with a built-in EOQ feature.
- Batch Control – This method is used when production of goods is managed in batches. However, in this method, it is imperative that the right number of components are in stock and enough to meet the needs for production before the next batch comes in.
Keeping Track Manually Vs Using an Inventory Control System
Managing stocks means an inventory list has to be created and maintained or timely updated including specific details and classifications like item value and location. More often than not, physical inventory count is required and audit of each stock’s value is vital for the accounting process. A manual inventory control approach that looks over the maintenance of inventory list and the actual items can be very time consuming that nonetheless yields an inaccurate and unreliable result most of the time. Barcodes that are often offered and readable in digital solutions like inventory control software help fast track the inventory count process. However, on the downside, this demands attention and intervention from time to time.
The market today still offers the simplest form of manual inventory system, also known as the stock book. This type of program, which is inspired by a manual approach, is best suitable for businesses with only a few inventory items; businesses that are just starting up. Such a simple program does the basic functions like logging of stocks issued and stocks received. Many companies use this alongside a simple reorder system. Meanwhile, businesses with more complex requirements are advised to use stock cards where every inventory item has a corresponding card with important details like description, location, value, reorder points, quantities, lead times, supplier details, history of previous stocks, and a lot more. At times, stock cards system can become a bit more sophisticated incorporating a coding technology to classify stocks.
RFID or Radio Frequency Identification tagging technology has also become a hit in lieu of barcoding facility. This RFID is designed to simplify and establish a more efficient checking of inventory. Like barcoding, it works on the same most vital purpose that is to account each item in the inventory as efficiently and securely as possible.
Basically, an inventory control system does the following:
- Monitor inventory levels
- Make orders and reflect updates on inventories
- Issue inventory items
Monitoring Stocks Using Inventory Control System
Inventory control systems automate the entire inventory process based on the same set of principles the manual process use. In other words, these software are designed to streamline the inventory control process, providing convenience on the part of the warehouse personnel while ensuring efficiency and accuracy of inventory data. With such digital solutions, an inventory valuation and all other inventory-related data can be retrieved easily and instantly.
Most inventory control systems boast of the following features:
- Inventory tracking including a facility that triggers or notifies users for a reorder or replenishment necessity when pre-set reorder points are reached
- Barcoding and barcode scanning that fast tracks the recording, processing, and counting of inventory items.
- A facility that suggests the fastest or cheapest suppliers
- A facility that automates batch control if goods are produced in batches
- Integration with accounting and invoicing systems.
- Demand forecasting that suggests users about products that probably would sell fast or slow in the next months depending on the sales history
However, an inventory control system is only as good as the data inputted to it. In other words, like how a digital solution should be, it’s human operated and will only work at an optimum when used properly.
What to Look for When Choosing an Inventory Control System
In this digital age, there are already a lot of inventory control systems available. As the options can get overwhelming, as you choose, you should take into account the nature and size of your business. And to get the best value of your investment, your inventory control system should feature the following at the least:
- Automatic updating of inventories upon receipt and issuance of items
- Centralized database that syncs updates from multiple channels
- Quality Control
- Batch Monitoring
- Integration with other systems
- Multiple User Access
- Scalability – ability of the program to accommodate more users come time the company expands.
- Ability to cater prices in different currencies
Inventory Control System Enhances Inventory Security
Achieving security of stocks and the overall inventory process is only possible if and only if important details about the stocks’ whereabouts are clear and constantly monitored. Portable or perishable stocks are usually exposed to more risks of loss.
- Threat against Shoplifters and Thieves
Businesses, especially retail ones, are most susceptible to this kind of threat. Therefore, as much as possible, staff should be trained to be always alert and keen against suspicious behaviors. This can only be made possible if a policy is clearly defined.
Customers can also be on the lookout and help observe against suspicious behavior, probably in exchange of a reward.
To protect inventories, the following tips should be exercised:
Tip #1: All expensive items in the inventories should be identified, marked, and secured with security tags like Radio Frequency Identification tags. The latter will trigger an alarm if they are moved past the sensor which is usually placed near the exit door of the retail store.
Tip #2: Delivered items should be kept at the right and secured inventory racks right away. This is where barcoding feature of inventory control system can help immensely as scanning of delivered items into the system will only take minutes versus hours or even days in the manual logging.
Tip #3: Monitor and carry out inventory count on a regular basis.
Tip #4. Install CCTVs in strategic locations.
- Threat against Staff
Sadly, threat by employees has also been a common scenario. To prevent such from happening in your company, below are some tips to consider:
Tip #1: Staff should be trained and made aware of the security systems and disciplinary procedures and policies the company has put in place. This includes educating them of the cost of stock theft and possible implications for job security and company turnover.
Tip #2: Procedures should be defined and implemented to prevent theft occurrences. Part of this is implementing fair policy for the employees as well. For instance, staff responsible of the finances should not be in held accountable of inventory records.
Tip #3: There has to be access restriction to warehouse, stationery cupboards, and stockrooms.
Tip #4: Changing staff controlling stock on a regular basis should be practices to keep away from collusion.
Apart from the abovementioned, quality control should also be looked into as it is also considered an integral aspect of inventory control. Failure to check on this area can draw customers away especially those whose safety has been jeopardized after using products with subpar quality.