What Is Inventory Control & Why Is It Important?
It is of utmost importance to know what inventory you have, where it is in your warehouse, and when stock is going in and out can help lower costs, speed up fulfillment, and prevent fraud. Your company may also rely on inventory control systems to assess your current assets, balance your accounts, and provide financial reporting.
Inventory control is an important aspect to keeping stock levels balanced with the current demand. If inventory issues are frequent, this problem can lead other customer to other suppliers entirely. But, when you have complete control over your inventory, the information and service you are able to provide to customers far exceeds "average customer service". By being able to see stock levels in real-time, you will have a better understanding of what's trending to your customer base and the items that aren't selling at all.
This idea plays a lot in with demand planning, and how it will affect your stock levels of your fulfillment center. Too much stock may prompt profit losses, but too few stock may turn customers away to other suppliers. See our blog post below to gain a deeper understanding of customer demand for your products and how keeping a proper inventory control is key to a successful operation.
Click here to view 5 Strategies to Solve Demand Planning Problems
How Do You Know You're Managing Inventory Poorly?
There are many signs your inventory management is bad and getting worse as time goes on, depending on your industry.
Here are a list of the most obvious symptoms of inefficient inventory management:
- High Cost of Inventory
- High Cost of Storage
- High Amount of Working Capital (Current Assets - Current Liabilities)
- High Amount of Obsolete Inventory
- Consistent Stockouts
- Low rate of Inventory Turnovers
- Spreadsheet Data-Entry Errors
- Shipping Wrong Item to Customers
- Lost Customers
There are usually many factors that produce the negative symptoms that lead to inefficient inventory management listed above, but all of them share a common element to the way you store your inventory.
Causes of Poor Inventory Management
Usually, one of the first tools that small to medium-sized businesses use is Excel to manage their inventory. Although these may work for a short term, they can quickly lead to arising issues as your business scales and grows.
Humans make mistakes, especially with numbers, so the smallest blunder or even just one incorrect detail could cost your company millions of dollars.
Manual Inventory Tracking and Stocktaking
As mentioned above humans make mistakes, and this is similar to the spreadsheets because it is time-consuming and error-prone as your company grows. Your stock levels will always be behind your actual inventory levels, which will cause stockouts and outages, resulting in a loss of customers and revenue.
Large Inventory Levels
Not only are there headaches involved in having large volumes of inventory, but this practice can actually cut into profits as well. Inventory reduction is the solution for your warehouse, and although it's not the easiest thing to do, it is essential to improve your inventory management capabilities to maximum capacity.
If you're not monitoring your metrics about sales trends, customer behavior, or best-selling items, you're likely to encounter problems and loss of revenue and/or loss of customers. With accurate metric reporting, the ability to forecast customers' future shopping behavior is made much easier, and you will be able to meet customer demand without exceeding your budget.
What are you doing with your warehouse and inventory management to fulfill orders quickly? See how to solve your inventory management issues in our blog post "10 Best Practices for Optimizing Inventory Management in 2018". Maybe you need to outsource and talk to the experts? Let's see what we can do for you today!