Inventory is one of a company's most important pillars. Without proper management of products, inputs, and materials, professionals cannot maintain production control, know how many items are available to sell, what is missing from the shelves, or what the fair price is for selling their goods. In other words, the company can lose control — and, in the end, have to pay a high price for it.
Not sure how to improve inventory management or how technology can help you with this operation? In this post, see why inventory control matters and how you can improve management and reduce storage costs with the help of a few tools. Check it out!
Why is inventory control important?
Maintaining inventory control is fundamental to a business's financial health. If products, inputs, and materials end up sitting on the shelves for too long, money doesn't circulate and the company ends up spending a large amount on storage.
Each inventory management method will depend on the business profile. But regardless of your niche, what matters is taking the necessary care so that warehouses have a healthier activity cycle — that is, with proper control over inflows, outflows, raw materials, and item storage.
The main benefits of managing inventory include:
- Better use of physical space;
- More control over the activity cycle;
- Continuous order fulfillment;
- Cost reduction;
- Higher profit margins;
- More efficient actions and strategies;
- Better financial health for the company;
- Lower storage expenses;
- Fewer delivery delays;
- Better use of capital.
Now that you know how important inventory control is, how about getting to know some tools to help with this operation?
10 tools that help with inventory control
Because it requires a series of precautions — such as continuous control of goods and inputs, accurate analysis of information, and data registration and updates — many management professionals get confused or don't know how to manage their inventories correctly.
Today, however, they can count on inventory control tools to help and further simplify these processes. They are:
#1. ERP system with integrated inventory control
ERP (Enterprise Resource Planning), also known as a business management system, is a tool that improves data entry and the flow of information. With the system's help, professionals can run the business with more confidence, while enabling more strategic decision-making. A good ERP system should support inventory counts and make it easier to analyze the performance of each item in stock.
#2. Inventory counts (Stock Turnover)
Evaluating stock turnover lets professionals know how many times inventory has been replenished — and whether there are slow-moving products or inputs sitting stagnant on the shelves. The calculation is the sum of the items that left stock, divided by average inventory.
#3. Just-in-time stock replenishment model
The term just in time means "at the exact moment." This stock replenishment model involves cutting production costs as much as possible, keeping only enough inputs and products to meet demand.
#4. LIFO stock movement model
LIFO, which stands for "last in, first out," is a stock movement model widely used by companies that do not work with perishable products. Here, the items that entered the warehouse last are used to measure the total value of the stored goods.
#5. FIFO stock movement model
Unlike the method above, FIFO stands for "first in, first out." That is, the concept is that the older products and inputs should be sold and used first. This model is recommended for companies in the food sector, which depend on a deadline to move or use their items.
#6. Lean production model - Kanban
Kanban is an inventory control tool that uses visual signals to optimize activities. Managers can apply this model using colored cards or sticky notes. By analyzing warehouse routines in a simplified way, it becomes easier for professionals to maintain production control, monitor tasks, and recognize errors.
#7. Cost management with average cost
This tool consists of identifying the value of the products, inputs, and materials that have been sold and of those still on the shelves. To find out the value of each item, divide the financial balance by the quantity of products — that is, calculate the average cost of each element to know the real value of your inventory.
#8. ABC product curve
To keep inventory more organized, the company can classify its items by degree of relevance. This method is useful for helping define which products and inputs move the most and/or are the most profitable, thereby avoiding the purchase and accumulation of goods with low turnover and/or low profitability.
#9. Barcode inventory control
Barcodes help standardize inventories. They allow professionals to register and count their products and inputs faster, which helps ease the work and improve the quality of operations.
#10. Supplier Relationship Management (SRM)
Supplier Relationship Management (SRM) is one of the most strategic inventory control tools. With an SRM system, it becomes easy to manage information related to procurement, sales, and inventories.
This knowledge allows management professionals to negotiate with suppliers with more confidence — contributing to lower costs and better product quality.
Do you see how important inventory management is? Regardless of your line of business, having control over goods, inputs, and other materials is what will determine whether your company is prepared and whether it will succeed in the market.
When professionals understand the importance of controlling their inventories — and use the right tools — it becomes easier for them to manage costs, meet customers' needs and, as a result, make the brand stand out from the rest.
If you still don't know how to perform inventory control correctly, try downloading this spreadsheet to optimize your operations. It's quick, completely free, and the material will help you keep a much more controlled inventory.
Originally published in Portuguese at useall.com.br.