5 Steps to Effective Inventory Control
Having everything at hand in just the right quantity contributes to the smooth running of any production process, regardless of whether it takes place in your kitchen or on the shop floor. If you've lost all hope of ever exercising control over your inventory, rest assured that it's very much within the realms of possibility.
Inventory control involves the optimal procurement, care and disposition of material required in a manufacturing or retailing process. The three kinds of inventory that are of concern to any business are raw material, work-in-process and finished goods.
Why is inventory control important?
Helps maintain stock in line with market demand or sales trends.
Reduces carrying and holding costs.
Improves stock turnover rates.
Builds your business reputation for always having adequate stock of merchandise in demand.
Controlling inventory is not a difficult job. The following is a 5 step process that will help you bring this potential problem under control.
Plan your inventory: Obviously, inventory control requires you to plan beforehand. Organize the movement of new goods and work-in-process as per a well thought out schedule. Ideally, new goods should come onto the shelves, just as the last piece is being sold, but that is neither feasible, nor free of risk. Therefore see to it that you neither hold several months' stock nor sport empty shelves in your store. An optimal order quantity minimizes total variable costs required to hold inventory. Software Programs like "Premier Manufacturing & Wholesale Edition 2006" will help you track this better.
Establish order cycles: If you can predict demand for your products, then establish a regular ordering pattern. Remember to consider the costs of preparing an order, the aggregate shipping cost and the economic order cost while setting up the order cycle. This allows you to minimize expenses. Spend some time to develop a system tailored to your business needs.
Balance stock levels: Inefficient management of inventory could easily dampen profits. Consider market and budget related issues while determining ideal stock levels. Optimizing inventory such that it does not result in excessive carrying costs, yet satisfies market demand, is a fine skill.
Assess the merchandise: Keeping inventory up to date and avoiding obsolete merchandise is another critical aspect of good inventory control. Remember, outdated stock is simply dead capital. This is particularly important with fashion or seasonal merchandise. It is better to mark down merchandise that is not moving well, than hold it indefinitely.
Follow-up and control the inventory: Take charge of checking the figures and reviewing the items in your store. This will help you make correct decisions about the disposal, replacement or discontinuance of different elements. Bear in mind that the market demand for some products can change suddenly and quick corrections might have to be made.
Remember, effective inventory control plays a vital role in the smooth and efficient running of your organization. Inventory control software can help streamline the process further.