INVENTORY CONTROL

Introduction

Inventory control ensures the availability of products and services to meet current
consumer demands. If done right, it takes due care of the supply chain management
(SCM), allowing effortless maintenance of the demand-supply network in the market.
When organizations implement different ways of controlling the inventory, they
ensure they always have a sufficient amount of stock available for customers.

With effective stock control measures, producers/manufacturers can achieve

warehouse management efficiently. It helps them avoid a shortage of products and a
last-minute rush to reorder.

Unfortunately, organizations sometimes overstock products and items, leading to

wastage if the goods remain unsold. This, in turn, incurs huge losses for organizations.
Also, manufacturers have to bear the cost of storage of the products regardless of
whether the sale occurs. This is how inventory management and its proper control
help producers and manufacturers save a lot of pennies, which they lose because of
overstocking or stockouts.

Though organizations can keep control of stocks easily by implementing internal

controls and production control measures, there are major businesses that never
bother about tracking their inventory. This, in turn, leads to huge losses for them.
However, if inventory control is taken care of, it can maximize profits through least
investment in stock.

An organization can ensure controlling inventory by maintaining records using

various media. For example, it can either manually track the movement of stocks and
their storage details, using a pen and paper or an Excel sheet, or get an inventory
control software deployed to do the same.

Brief Literature Review

Let’s see the parameters that affect inventory control:

● Item lead time

● Shelf life of perishable items

● Seasonal inventory items

● Customer demand

● Available storage space

6 Inventory control methods

Let’s talk about inventory control methods, techniques, and formulas. As we already
discussed, today, inventory control is a lot more than simply counting stock.

1. Two bin method

To avoid inventory shortage, the items are stored in two bins. When the first bin
becomes empty, stock from the second bin starts getting used and at the same time,
replenishment is done in the second bin.
2. Barcoding

UPC/EAN barcodes are black lined symbols with 12 or 13 digit numbers under
the lines. In ERP/inventory software the printed barcodes can be scanned to
update quantities in transactions. It’s similar to what you see at the cashier in a
store but industries may use wearable barcode devices for better efficiency.

3. Labelling
Labeling refers to identifying different inventory items with specific labels.
Barcodes are used universally to identify units but in warehouses, companies use
SKUs to track different types of items. Labeling via easy to read SKUs helps to
find and pick stock for shipments.

4. FIFO and LIFO

Using inventory is done in two ways FIFO and LIFO. Both have their advantages and industries
where it makes more sense to use them.

● First in first out: The oldest units are chosen for orders. It’s common when companies
deal with perishable items. Batch numbers are associated with expiration dates and
simply the older batches are selected for order fulfillment.

● Last in first out: The newest units are sold first. Although uncommon and even
impractical for perishable items, LIFO is done in industries where the cost of
acquiring new goods is ever increasing. It benefits revenue booking and reduces tax
liability.

5. Stock bundling
Bundling different items together to create product bundles is a common
operation that helps companies introduce new products or sell older ones that are
sitting idle. Simply creating bundles with new/old items with popular products
increases sales, you can also offer discounts on bundles to make attractive deals
and speed up sales.
6. Quality inspection
The operations of controlling the quantity of stock items falls under inventory control.
However, the act of setting and defining the quality standards is a part of inventory
management. From a control perspective, regular quality inspections when the stock
enters and exits warehouses should be mandated. Over time you’ll find suppliers that
consistently send quality materials. In case of a manufacturing business, you should
consider incorporating concepts like lean and six sigma to increase quality and reduce
defects.
Importance of inventory control

Managing adequate stock is key for managing inventory successfully.

Overstocking will lead to cash flow blockage and the additional cost for
managing excess stock. On the other hand, understocking leads to loss of sale
due to non-availability of stock at the right time.

As a result, a business needs to implement inventory control so that the right

product at the right place and the right time is available.

Inventory control helps the business in knowing the shortfall and quantities to
be ordered considering the net stock available. Thus, it ensures that enough
stocks are maintained to meet customer needs, at any point in time.

Advantages of inventory control

● Maintaining an optimum level of inventories

● Helps in laying the procurement process considering the
wait-time, lead-time etc.
● Periodical inspection of inventories
● Guides us on storing and issuance of inventories from godowns.
● A systematic record of movement of materials.
● It helps to lay out plans for physical verification of inventories.

Knowledge Gap

Objective

let’s see what are the objectives of inventory control:

Ensure stock availability
Having the right inventory levels is only a part of the problem to ensure smooth
flow of goods in warehouses. For a manufacturing company, there are
bottlenecks caused by disorganized warehouse structures or related items being
placed too far away. Inventory control’s objective here is to ensure a steady
supply of raw materials and subassemblies (manufactured or outsourced) from
the warehouses without interruptions for fulfilling manufacturing orders on
time. This also applies to distribution businesses where inventory has to be
picked and packed for shipping orders.

Prevent wastage
Inventory waste happens in two cases—either the stock is defective or the stock
has expired. It also happens when stock is idle and there’s no market demand.
Here, inventory control aims to prevent defective stock from entering your
warehouses with quality control, and to prevent dead stock or accumulation of
expired items.

Maximize profitability
Poor inventory control impacts profits negatively. This is not surprising once
you realize that one of the other objectives is avoiding stock wastage. Not only
that, but poor inventory control also means difficulty in picking items from
warehouses where required, be it manufacturing orders or distribution activities.
If the orders are not fulfilled on time, customers won’t be happy. Hence, good
inventory control positively impacts revenue in two ways—by avoiding money
lost in expired stock and eliminating any inefficiencies during stock movements
between storage areas.
Save storage space
Stocking inventory requires physical space. Actively managing your inventory,
warehouse layouts, locations, saves on warehouse space and hence rent costs. It
also involves doing away with excess stock, dead stock, and expired stock. If
your storage areas are planned well and aren't occupied by dead stock, you’ll be
saving on storage space for the products that sell better.

Significance and Novelty

Ways by which inventory portfolio can be upgraded to gain maximum

long-term returns:
● Tracking items across different locations for quick and constant updates
● Streamline check-ins and check-outs of inventory for efficient project
distribution
● Eliminate outages via automated stock management
● Make provision to accommodate diversification
● Record product usage over time to estimate demand
● Refine inventory management practices using inventory control software

Inventory control is significant for the survival of the business. Don’t

let shortages or excess of inventory to become the downfall of your
business. The method you choose will depend on your business type and
the essential features that need to be fulfilled. You can use software
applications like ONEBUSINESS to have better control of the Inventory.
Conclusion
Inventory is money sitting around in another form. You paid money for your
inventory, and you will get that money back when you sell it. Until you sell
them, you need to hold and manage inventories. Gone are those days where
managing inventory was a nightmare. This is because the businesses have
started using inventory management software which comes with in-built and
automated inventory control techniques.

Basis the consumption of the inventories, the inventory management software is

smart enough to know the net stock, shortfall, and quantity of stock to be
ordered. More importantly, information is available readily at a click which
allows the businesses to take timely decisions.

Effective inventory control is vital for any business, from a newly established
brand all the way up to Amazon. It allows you to optimize your cash flow and
reduce resources spent in inventory control. By using automated inventory
control software systems and inventory control techniques, you can implement a
strategy for inventory control that tracks your assets in real-time. Giving you
visibility and control over your stock.

Even if your business has a relatively small operation, you can choose between
a periodic or perpetual inventory system. However, if you have a large volume
of stock or more complex processes, a perpetual inventory system is definitely a
more suitable option. And if you look to complete your retail tech stack,
research the best inventory system that can be seamlessly integrated with the
rest of your business operations.
REFERENCES

https://erpnext.com/blog/inventory-management/inventory-contr
ol
https://tallysolutions.com/inventory/inventory-control/
https://onebusinesserp.com/learn-about-inventory-control-and-it
s-significance-in-the-business/
https://www.brightpearl.com/inventory-management-system/inv
entory-control