Through inventory control, you will be able to maintain minimum inventory levels, ease your liquidity situation, keep costs down, maximize profits, and succeed in keeping your customers satisfied by delivering orders on time.
Manual inventory control might help to an extent. But as you scale, it leaves open a huge window for human error. To sustain certain growth in business and tap sales through multiple channels, you will need to take a more disciplined and structured approach to inventory control. Many people use inventory management and inventory control interchangeably.
However, the two terms mean different things and deal with different aspects of inventory. Inventory Management encompasses the entire gamut of aspects related to your supply chain — right from tracking raw materials through to order fulfillment. Think of it as an umbrella term that includes what, when and how much you buy, stock and sell; managing suppliers and customers, how you manage product pricing, order fulfillment, returns, etc.
In other words, inventory management is the handling of inventory from sourcing to order fulfillment. Inventory Control specifically refers to how you manage your stock, also called warehouse inventory. Managing warehouse inventory system gives you the ability to optimize your stocks in relation to sales in the most profitable manner by taking into account several factors that affect demand and supply for a product.
Good inventory control helps avoid missed order fulfillment and lost business. As your business grows, you will find that objectively planned and optimized inventory control is key to business success. Inventory control can be achieved by focusing on two quantities or numbers.
This calculation is based on parameters like costs of sourcing and storing the inventory. This is the specific inventory level at which you need to order more stock for a product to continue selling it. Economic Order Quantity or EOQ tells you how much product you need to order, while Reorder Point tells you at what inventory level you need to order again.
Too little inventory and you can find yourself going out of stock, leading to unhappy customers. Too much and you end up with increased storage costs, spoilage, and damages or even product expiry. How can you decide what quantity of inventory is right for you? This is where using the EOQ formula can help. One variant of these shirts sell at units per year.
The best EOQ for this product is 15 units at a time to minimize holding costs while also maximizing stock movement for the given demand. Learn more about Reorder Point in our article here. This includes information on calculations as well as examples to help you calculate reorder levels by yourself. In order to control your inventory accurately, you need to know how much stock you have on hand.
You can do this through frequent counting. There is no procedure as necessary, and as fraught with errors, as inventory counting. Read more on how you can do it right in this article on stock reconciliation , and learn more about cycle counting.
Remember- accurate counting is only one half of the process. You need a way to carefully soft and store this data from repeat counts. Best Small Business Funding Options. Ultimate Guide to Small Business Banking. Best Small Business Loans for Women. Best Small Business Credit Cards.
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We also added in some new features for scannability and easy reading! Effective inventory management affects every aspect of your business—from your warehousing costs to your ability to fulfill orders accurately and on time. You want to be on top of everything from raw materials to finished goods.
Unfortunately, inventory management is a difficult business process to do by hand. It takes time, and if you make a mistake, it could have ripple effects that negatively impact your business for months or years. Good inventory management software is designed to help business owners by automating their inventory tracking, inventory planning , and manufacturing.
Inventory management is an overarching term that refers to your tracking system for every phase in the product life cycle. It can include your sales forecasting, product ordering, supply chain management, warehouse management, and customer fulfillment solutions. Fortunately, inventory management software can help you minimize risk and streamline your costs, which ultimately means a healthier bottom line for your business. Any inventory management software worth its salt should include basic economic order quantity EOQ calculations.
EOQ helps you identify the most cost-efficient method for ordering new products by weighing the costs of storing your products versus the cost of ordering your products —it compares product stock level with cash flow. Inventory management software can do this for you automatically so you can minimize your warehousing fees and save money.
Inventory management software helps minimize this risk because many solutions include forecasting. This inventory management process checks your inventory level and ensures proper inventory management for your business. But using inventory management software to do the math for you is still a heck of a lot more accurate than trying to crunch the numbers yourself.
Inventory management software can also integrate with your point-of-sale POS system to update your stock numbers in real time. Depending on the situation, you may stick around and simply choose another item at the store. Chances are, your customers are the same. And if that happens repeatedly, they may stop coming back to your store altogether.
This helps you sell more in the here and now, but it also helps you secure customer loyalty so you can sell more items in the future.
Have you ever tried to buy something only to find that the product you want is out of stock? Or waited for weeks for a product to arrive? Or opened a package only to discover that the item was damaged or the wrong item altogether? None of these experiences paint your business in the best light, and they can all negatively impact customer loyalty making your customers less likely to choose your product in the future. But again, inventory management software can help minimize these mistakes and deliver the best possible experience for your customers.
An effective inventory management system is the cornerstone of successful eCommerce and online retail brands. With a strategic plan in place that optimizes the process of overseeing and managing inventory, including real-time data of inventory conditions and levels, companies can achieve inventory management benefits that include:.
As you can see, proper inventory management is very important, especially as inventory volume increases, and can make or break a business! There are so many great advantages that can result from managing inventory properly. Here are some additional benefits to keep in mind:.
Accuracy of product orders, status, and tracking are critical to good inventory management. An effective fulfillment partner will have real-time software and systems in place to make sure no product is left untracked throughout the fulfillment process. A good inventory management strategy leads to an organized fulfillment center. An organized warehouse results in more efficient present and future fulfillment plans. This also includes cost-savings and improved product fulfillment for businesses utilizing the warehouse for managing inventory.
With proper inventory management in place, less time and resources are spent invested in managing inventory and can be allocated to other areas. Technology is often used to speed up tracking and fulfillment operations, ensuring inventory records are accurate.
Due to improved ordering accuracy, efficiency, and product flow, good inventory management results in saved time and money. Effective inventory management and control protects from incorrect or damaged goods being shipped to customers.
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