Running a business can be challenging if you do not have enough stock in hand.
Ensuring uninterrupted product supply to the customers can be made possible by vigilantly controlling and monitoring the inventory. Inventory control plays a major role in making your business a brand and reaching your customers through advertising or any other channel. Sometimes people confuse inventory control with inventory management, but both are not the same. So, what is inventory control?
Inventory control refers to ensuring that you have enough stock of the product to cater to the consumer’s needs. Inventory control typically relates to the product stock in the warehouse before dispatch. On the other hand, inventory management means looking over all the processes associated with inventory control, including forecasting the number of products required and warehouse capacity, etc.
How can you Control your Inventory?
While you know that inventory control is one of the most crucial elements of supply, it is essential to know how you can control the inventory to get the benefits. Here are some of the approaches for inventory control:
- First-In-First-Out (FIFO) & Last-in-First-Out (LIFO)
- Track the inventory
- Identify low selling products
- Use cloud-based inventory control systems
- Track product information and demand
Importance of Inventory Control
Besides making sure that your warehouse is not hoarded with products that are not selling, there are various benefits associated with inventory control. Controlling and managing your business inventory enables you to reduce losses and build a strong business. Some of the benefits of inventory control are:
One of the golden rules of running a steady business is considering the risk-to-benefit ratio. Neglecting the inventory indicates that you are adding to the risk without realizing it. Inventory control allows you to understand slow-moving and outdated items sitting in the warehouse for a long time. Having a firm control over the inventory ensures you follow FIFO and avoids losses by dispatching previous stock prior to the new one.
Saves from Theft
Having a huge inventory and not taking enough care lead to losses in the form of theft. If you are not vigilant about the material in the warehouse, your employees might feel tempted to try their luck as they are aware of the lack of check on the inventory. Keeping an eye on the stock through manual checks or cloud-based systems saves you from theft. Extra care must be taken care in the raw material area as it is more susceptible to such incidences than the final product warehouse.
Saves from Demand Fluctuation
Suppose you are a heater manufacturing company and sell a hundred units a month. You did not realize that winters are approaching and there is an increase in demand for the product in the market. If you have a hundred units to supply for the month while more customers are looking for the product, you are losing a chunk that you might have made in peak season.
To cater to high-demand seasons, it is wise to always keep extra goods in your warehouse that can compete with others and fulfill market demand. If you think that the product would keep sitting in the warehouse, LIFO and FIFO must not be forgotten; produce more but send out the previous stock earlier.
Inventory control is not only important for manufactured products but also raw materials to ensure continuous production in your facility. Controlling inventory of the raw material provides you with enough material to manage fluctuating demands in the market. Without a shortage of raw material, you get uninterrupted production, and sometimes it gives you an edge over other manufacturers.
Right use of Working Capital
Stocking more material than needed takes space in the warehouse and blocks capital. Evaluating the stock needs and incoming and outgoing products makes you buy enough material to cater to current production needs and manage fluctuating demands. If you keep adding more material without considering the previous stock, you restrict your capital that could be utilized in another way for the business.
Better Customer Service
By catering to customers’ needs, you create a loyal customer base. When you have enough raw material to produce products and release them into the market, your business reaches more people. When the consumers get the product they need with all required specifications, they are more likely to repurchase it. Ensuring the maintenance and control of inventory gives you control over your production and leads to better customer service and satisfaction.
The Bottom Line
Inventory control can help you create a loyal customer base by ensuring enough raw material and release of products at the required time. You can also reduce losses caused by the inability to reach consumer demands because of the restricted amount of raw material at hand. Inventory control allows you to keep a check and balance on the material and product to build a brand everyone relies on.
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.