Managing your inventory is a make-or-break aspect of running a successful business, no matter the size. Top-notch inventory management controls make sure you have the right products, in the right amounts, and at the perfect time to meet customer demand and boost profits. In this article, we’ll dive into the importance of inventory management controls and share various techniques you can use to put them into action.
Types of Inventory Management Controls
Here are some tried and tested inventory management controls that businesses can put to work, along with examples of how our clients have successfully implemented them:
The reorder point is the lowest inventory level that must be maintained to avoid running out of stock. This level is determined by factoring in the lead time for restocking, the expected demand for the product, and the safety stock. The reorder point helps businesses maintain sufficient inventory levels to meet customer demand without overstocking.
One of our clients applied the reorder point strategy, which led to a significant reduction in overstocking and associated storage costs.
Safety stock is the additional inventory a business keeps on hand to protect against stockouts due to unexpected demand spikes or supply chain disruptions. By holding safety stock, businesses can lower the risk of stockouts and meet customer demand even in unexpected situations.
Our client adopted the safety stock strategy, enabling them to weather a supply chain disruption without losing sales.
Lead time is the duration from placing a purchase order to restocking a product. Lead time must be considered when determining the reorder point and safety stock, as it affects the overall inventory management strategy. By trimming lead time, businesses can decrease inventory and boost efficiency.
One client managed to slash lead times by working closely with their suppliers, which led to improved inventory management and increased profits.
FIFO is an inventory management method that involves selling products in the order they were received. This method helps businesses maintain product freshness and quality while reducing waste.
A client who adopted the FIFO method experienced a reduction in expired products and waste, leading to cost savings and happier customers.
JIT is an inventory management method that involves keeping only the minimum inventory necessary to meet customer demand. JIT helps businesses cut costs by minimising inventory levels and avoiding overstocking.
A client who implemented the JIT method saw a decrease in storage costs and a more streamlined inventory management process.
Making Inventory Management Controls Work for You
Implementing inventory management controls requires a blend of technology, processes, and people. Follow these steps to put effective inventory management controls in place:
- Evaluate your inventory management needs: Identify the products that need inventory management controls, the desired inventory accuracy level, and the frequency of inventory counts.
- Use technology: Implement inventory management software to automate the process and reduce human error.
- Set up processes: Create procedures for receiving and storing products, performing inventory counts, and reconciling inventory discrepancies.
- Train employees: Make sure employees are well-versed in the technology and processes involved in inventory management.
- Keep an eye on performance: Regularly monitor inventory levels, accuracy, and turnover to ensure the effectiveness of your inventory management controls.
Conclusion: Take Control of Your Inventory Management Today!
Now that you’ve got the lowdown on inventory management controls and how they can benefit your business, it’s time to take action. Book a demo with us to see how Clarus WMS can revolutionise your inventory management process and boost your bottom line. Don’t wait—book your demo now!