Managing the stock level of a business is a risky task. Small mistakes often lead to heavy financial mishaps. This is where inventory control comes into the picture.
Efficient inventory control relies on gathering data from multiple sources, such as purchases, reorders, storage, shipping, receiving, customer satisfaction, and loss.
Forecasting future demand and understanding reordering points are some elements that can affect the flow of inventory. Let’s learn the ins and outs of controlling inventory like a pro! Discover the essential elements that make for effective inventory control.
What Is Inventory Control?
Inventory control, also known as stock control, is simply the company’s inventory or stock management process to meet future orders’ demand. To narrow it down a little, it incorporates managing the available stocks, keeping stocks future-ready, and planning multiple things for sales and stock-out.
A successful inventory control ensures that the basics are done properly. The basics entail that all the products be well labeled, and the inventory tracking software must work efficiently. All the stock keeping units (SKUs) need to be managed according to the demand, with fast-selling products given more attention. The manager should ensure that a keen periodic inventory audit is performed.
Inventory control also ensures establishing a reorder point. In simple words, a reorder point is a point wherein a company needs to reorder inventory so as to not run out by the time the new inventory is delivered. This helps keep the production running without any downtime. It will also help with demand forecasting and stock management according to the requirements.
A reorder point can be joyful as well as challenging for a business. When a company hits the reorder point, they are happy that products are selling out, yet nervous as they need more inventory soon to produce more.
Why Is Inventory Control Important?
Production, storage, demand, and sell-out is a cycle that keeps on moving in an industry that operates an inventory. If any of these elements is slightly hampered, the entire management will get shaken up. There are endless reasons to answer why inventory control is important, but now we will focus on the four base pillars.
1. Helps in Cost Management
Cost is the most important yet challenging term in any inventory management setup of the company. Managing a perfect bandwidth of inventory that will leave no dead stocks and at the same time, meet all the demands of the customer is tough. Losing any of these two elements will directly affect your business finances.
Inventory control must ensure all the crucial factors work together to avoid any kind of serious loss.
2. Reduces Waste or Dead-Stocks
Inefficient inventory control can leave a lot of waste and dead stocks. By focusing on powerful forecasting and data analysis tools, companies can predict future demand and optimize orders and replenish accordingly for a more efficient process. This can effectively reduce waste and address dead stock.
3. Improves Brand Reputation and Loyalty
Inventory control ensures that the brand can meet the quantitative demand of customers. In simple terms, the customers must get what they want at the right time. Customers are the right reflection of a brand’s reputation and loyalty. If the stock keeping is well executed, then it will positively influence customer satisfaction, brand reputation, and loyalty.
4. Manage Storage
Storage requirements no doubt vary with businesses. Improper storage management is associated with poor inventory control. The more inventory a company holds, the more requirement for space will increase. It will increase the cost of production, employees, and every element associated with it.
A company with a tight grip over inventory control can reduce the extra storage requirements and optimize the usage of the space to store inventory.
How Inventory Control Mismanagement Can Affect Customer Satisfaction?
According to a study conducted by Harvard Business Review, almost 26%-31% of customers substitute a different brand or buy the product from another store if a desired item is out of stock from a brand. The overall study data also claims that a business will directly lose nearly 50% of its intended purchases in such a scenario.
One of the signs of poor customer service is constant stockouts. Customers are more likely to get frustrated when they cannot find the product that they desire in stock. They don’t consider buying any other product if what they are searching for is out of stock. To avoid this customer dissatisfaction, you can set your inventory’s reorder point to alert you once your inventory is restocked.
Now, let’s look at inventory control mismanagement from a different perspective. Inventory control is managed by software or a system. This system requires updates and security, or else it will spoil plans and insights.
Recalling the incident of 2013, “Target” suffered a major data breach that exposed millions of customers’ personal information. The breach was caused by a vulnerability in Target’s inventory control system that allowed hackers to access customer data. As a result, Target’s reputation was damaged, and customers lost trust in the company. We need to look over every aspect of a situation, a close inspection can reveal one’s flaws and errors.
Inventory control mismanagement can create havoc for the business’s future, thereby ruining its reputation. This is why managing your inventory perfectly and accurately is extremely important.
How to Prevent Inventory Control Mismanagement?
For efficient inventory control, you need an organized system that tracks the flow of inventory and provides better visibility within the supply chain. Besides visibility and traceability, you also need to consider having real-time data and updates related to your inventory.
Here are some ways in which you can ensure that your inventory control is managed properly.
- Set up inventory control systems: With a robust inventory management system, it becomes pretty easy to manage inventory levels. While setting up an inventory management or control system, make sure that it not just monitors your inventory but also tracks the stock levels and facilitates stock replenishment.
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- Set a reorder point: Setting a reorder point for each item is essential to ensure that you avoid stockouts. By setting a reorder point, you can ensure that you have sufficient inventory on hand to meet customer demand.
- Conduct regular stock counts & review regularly: Besides relying on an inventory management system, make sure to conduct stock counts to identify discrepancies between recorded inventory levels and physical inventory levels. Also, review your inventory target, reorder point, and other such parameters from time to time.
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FAQ: Inventory Control
1. What is inventory control?
Inventory control is the process of keeping track of available stocks, ensuring they’re always ready for the future, and planning for sales and potential stock-outs. This overall process is known as inventory control.
2. What is a reorder point?
A reorder point is the minimum inventory level at which a company must order more to prevent running out of stock. When a company’s inventory runs low, they risk running out of stock.
3. How do dead stocks and waste get reduced via inventory control?
Optimizing inventory levels through demand forecasting and data analysis helps businesses reduce waste and dead stocks. Inventory control ensures that orders are streamlined, and replenishment is efficient.
4. Why is inventory control crucial for cost management?
Maintaining a balanced inventory is key to a company’s financial success. By effectively managing supply and demand, losses from overstocking or stockouts can be minimized.
5. What effect does poor inventory management have on customer satisfaction?
Poor inventory control can cause stock shortages, making customers unhappy and driving them to look for other options. This hurts sales and lowers customer satisfaction.
Conclusion
Inventory control mismanagement has a significant negative on customer satisfaction. Make sure that you take the time to evaluate your inventory management practices and implement these prevention measures today.
Also, don’t forget to check out our product OneSETU by QodeNEXT! This comprehensive traceability software provides real-time data and analytics that can be used to optimize inventory management.
By using OneSETU, businesses like yours can benefit from improved inventory control and traceability, which can lead to better quality control, increased efficiency, and reduced costs. OneSETU can also help businesses comply with regulations and standards related to traceability and product safety.
Additionally, OneSETU can provide businesses with valuable insights into their supply chain and customer behavior, which can inform decision-making and improve overall performance.
Remember, effective inventory management is the key to running a successful supply chain, and it all starts with preventing inventory control mismanagement.
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