If your business is responsible for the physical inventory, the implementation of the proper inventory control system is a requirement. This is because, often, control of inventory is the only thing that stands between your business achieving its objectives and losing customers.
Implementing a proficient inventory control system allows businesses to reduce human error, boost profits, and obtain accurate metrics while ensuring customer satisfaction for every sale.
What is an Inventory Control System?
An inventory control system is a combination of tools, processes, and methods employed by companies to control and improve their inventory levels effectively. It’s the process of monitoring the inventory levels, sales, orders, and deliveries to increase stock and ensure that the operation runs smoothly. The main purpose of an inventory control system is to make sure that a business has the correct amount of inventory at the appropriate moment to satisfy customer demands while minimizing the cost of carrying and the possibility that stockouts could occur (running out of goods).
An efficient Inventory control system can help companies to balance between stock for customers’ demands and also remove the excess inventory that holds up the company’s capital and causes storage expenses. By optimizing inventory levels, businesses can improve cash flow, lower hold costs, enhance the customer experience, and maintain an advantage in the market.
7 Reasons to Need an Inventory Control System
Inventory control systems typically comprise a combination of software and hardware that aid businesses in managing their inventory of all items. This is especially useful for companies that operate through multiple channels. These systems provide retailers with the capability to track stock, establish reorder points, monitor turnover, and much more.
The objective for every successful business is to market its product and earn a profit, and make its customers satisfied all at the same time. Although it’s as easy as it might appear, these goals are nearly impossible if you do not manage your inventory effectively. Here are some signs that your business should implement an inventory control system.
Real-time inventory tracking
Inventory control systems track trends in sales and product movement, providing you with the exact raw materials and finished goods at any point in time. With the aid of inventory control systems, your business will be able to easily monitor the inventory levels and maintain a precise list of inventory throughout the day.
They will tell you precisely what inventory you’ve got and which items are in short supply and which new items to order. This is especially important as your company grows and handles inventory over multiple channels.
Also read: 9 Ways to Help Effective Warehouse Inventory Management
Avoid stockouts with accurate reorder points
A reliable inventory control system will accurately calculate reorder points for every SKU. When sales trends change, the system will adjust to reflect the changes and update the reorder points (as necessary) to ensure that you have plenty of stock available.
Making better budget decisions through inventory reports
The inventory turnover ratio tells your company how often it is able to replace and sell items within a specified time. A system for controlling inventory provides an accurate report on the turnover of inventory that could affect the quantity of purchase orders or demand forecasting data. A good understanding of the amount of inventory you have is beneficial for cash flow management and adapting your budget according to the sales of your products.
Automate purchase and reorder inventory
If your business is equipped with an inventory control system, it allows you to buy and reorder quickly. The systems eliminate the guesswork of what and when to purchase, meaning you can make sure that each SKU is prioritized, decrease dead inventory, and ensure that inventory is available.
Any business aims to make its products available for sale and make a profit, and ensure there customers are completely satisfied. Although it’s easy as that might appear, these goals are almost impossible if you’re not able to manage your inventory.
If one of these applies to your online store, there’s a high possibility that you’ll require an inventory control system to increase operational efficiency.
Reduce understocking and overstocking
Controlling your inventory is crucial to keep the supply chain and order fulfillment operating smoothly. With the help of inventory control strategies, you stay clear of the traps of understocking and overstocking. This will save your time, costs for inventory, and energy in the long run.
Streamline order processes
There’s no time to waste on trying to upgrade your processes or streamline your processes, especially if you’re not using a reliable method of shipping and receiving or ordering. The inventory control system can be quickly automated for these tasks to eliminate the countless errors that can be caused by manual entry.
Reduce inventory loss
Are you a business facing losses in inventory, but you aren’t sure of the best way to stop it? Inventory control systems detect anomalies in your inventory count to help in reducing damage or spoilage of perishable products or theft potential, which can help protect your profit.
Types of Inventory Control Systems
Once you’ve figured out the necessity for high-quality control of your stock (and the many advantages it brings), it’s time to investigate the two types of inventory control systems. Although perpetual and periodic systems share many similarities, they each possess distinct capabilities and features with unique applications.
Periodic inventory system
A periodic inventory system doesn’t keep track of the inventory regularly; however, it allows businesses to examine their starting and ending inventory levels within a specific period. The systems keep track of inventory, making use of physical cycles. So, when the physical inventory is complete, the balance of the bank account for purchase is paid to the inventory account and is later adjusted to reflect the value of the final inventory.
A regular approach is best for companies that can estimate the cost of closing inventory by employing LIFO, FIFO, ABC analysis, or any other accounting method.
If your business is thinking of using a periodic system, it’s crucial to keep in mind that the beginning of inventory is always after the last period’s inventory count.
Perpetual inventory systems
Perpetual inventory control requires some additional hardware and typically utilizes barcode scanners along with software. However, it provides the most accurate information on every SKU across all channels.
A perpetual inventory control system is best for companies that are involved in inventory processes and have multiple channels.
Due to their built-in automated features and user-friendly perpetual systems have become the go-to standard platform for modern e-commerce optimization.
Also read: Top 8 Receipt Scanners for Your Small Business
3 Features to Look for in an Inventory Control System
As previously mentioned, Inventory control systems often incorporate software and hardware components to eliminate differences and guarantee reliable, precise results. The most popular technologies used for inventory control are barcodes and QR codes, and RFID systems.
Barcodes
Utilizing barcode scanners and barcodes is a very efficient technique and will reduce inventory mistakes caused by manual procedures. If implemented as part of the inventory management system, barcode technology will automate inventory updates, avoid mistakes in data entry, track transaction history, and set the minimum quantities or reorders.
QR Codes
QR codes are barcodes with two dimensions, which can be read horizontally or vertically. Similar to barcodes and QR codes can be used by mobile devices and QR code scanners, but unlike a single-dimensional barcode, the QR code has a capacity of just 7000 digits, which means they could be the fastest and most precise tracking system.
RFID
Radio Frequency Identification (RFID) systems track and control inventory movements using either passive or active technology. Active RFID employs fixed tag readers for its warehouse management. However, passive RFID makes use of portable readers. This is why both small and large companies often employ active RFID for real-time tracking.
Summing Up
The inventory is the heartbeat of any online store. Ensuring that the products you need are in stock can prevent backorders, keep customers satisfied, and make your business more profitable. An efficient inventory control system can do most of the work for you by automating manual inventory control procedures and streamlining your logistics process, and providing you with the ability to monitor the inventory levels.
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