Best Practices for Inventory Control

Inventory Control

Inventory Control is the techniques and processes used by businesses to monitor inventory levels, sales and demand trends and adjust purchasing, production and shipping activities accordingly. The goal is to minimize waste through reducing dead stock, overstocking and inaccurate demand forecasts. Inventory control also involves establishing best practices for managing inventory, including setting par levels and reorder points, as well as maintaining accurate product tagging and categorization.

Maintain consistent product labeling – This includes SKUs, barcodes, supplier codes, country of origin and lot numbers. Ensure all product data is recorded in a centralized location to improve tracking and reporting.

Decrease write-offs – A common and costly inventory mistake, these are products that can no longer be sold due to spoilage or damage. Developing an effective system to manage these can reduce the amount of inventory you have to write off and frees up cash flow for other purposes.

Establish reorder points – Creating a reorder point system helps you to predict when to replenish slow-moving or popular items so they don’t go out of stock. You can determine reorder point amounts by looking at product sales and production lead times or by using a system such as ABC analysis.

Avoid storing high-volume, low-profit products – These items take up valuable warehouse space and slow the process of filling orders for fast-selling goods. You may find it more cost-effective to partner with a distributor or use a drop shipper, such as Amazon, that carries these products and ships directly to customers.

Implement a perpetual inventory system – This is an automated system that updates inventory levels continuously and immediately via the POS or asset management software. It is more expensive to implement than the periodic system due to equipment costs, but can save on manpower and time as employees don’t need to physically count or record inventory.

Review supplier performance – A reliable and responsive supply chain is essential to ensuring you have the right quantity of inventory in your warehouse at the right time. If you notice that a particular supplier is consistently late or underdelivering on orders, this could impact your profitability and require you to change suppliers.

Do regular inventory audits – It is important to regularly compare what you have in your warehouse with the number recorded in your POS or ERP system. This can be done with an annual physical inventory count that counts every item or with a cycle counting system, which is an ongoing process where a few items are audited each day, week or month.

Implementing the right inventory management processes will help you balance supply and demand and make more informed business decisions about special promotions, backordering or discontinuing certain products. By reducing the number of slow-selling goods you carry in your warehouse, you can free up space for more profitable items and improve customer satisfaction. This will ultimately increase your bottom line.