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| Inventory management is important for a business. |
Mastering Inventory Control: A Must for Every Startup
Managing your inventory efficiently is essential for any business to achieve profitability success, yet startups often fail to recognize this. Without proper inventory control, your startup may experience little inventory, and you won't be able to meet your customers' demands, which can also affect your profit.
So, if you don't like wasting profit, tracking your business inventory regularly is integral to paving the way for long-term success. This article will discuss everything about inventory control—from its importance to your startup and some proper inventory management tips for operational efficiency and financial stability for small businesses.
What is Inventory Control?
Inventory control is the process of inspecting a store's stock and keeping it at target levels while considering the organization's best interests financially. Inventory control ensures a company keeps enough inventory to meet anticipated demand while incurring the fewest holding costs possible.
There is a difference between inventory management and inventory control.
- The phrase "inventory management" is broad and includes every process, from purchasing to making a profit.
- Contrarily, inventory control is a subset of inventory management that primarily pertains to the goods stored in the warehouse. Because of this, inventory control also includes warehouse management. Supply chain management (SCM) is also a crucial component of inventory control that oversees the flow of raw materials until the products are sold to customers.
Importance of Inventory Control to Your Startup
Keeping enough stock on hand is essential to effective inventory management. Overstocking will result in increased expenses for managing surplus inventory and a blockage in cash flow. Contrarily, understocking results in missed sales because inventory isn't available when needed.
Therefore, startups must implement inventory control to ensure the right product is available at the right time and place.
Inventory control helps the startups determine the gaps and order quantities based on net stock levels. As a result, it guarantees that there are always enough goods on hand to meet customer demands.
Strategies for Effective Inventory Control
1. Develop a Comprehensive Plan
A solid plan is the first step toward inventory control. The plan is not static; you must keep it updated to regularly reflect the state of your goods in the warehouse. It is pointless to execute before preparing because this could lead to future issues.
Instead, draft a control plan involving everyone knowledgeable about the inventory processes. This will guarantee that the strategy is comprehensive and allow everyone to contribute.
The strategy must cover several topics, including:
- How do you intend to measure your inventory in the warehouse?
- It should also include potential stock availability risks to help you devise mitigation strategies.
2. Leverage Robust Inventory Management Software
While it may not be at the top of your priorities, a reliable business tool can help with operation efficiency. Hence, to help reduce errors in inventory control, leverage inventory management software for its appropriate automation. Although an inventory control system is available, it can only handle control procedures. So, to have the best of both worlds, choosing an inventory management software solution is essential for effective inventory control.
Over time, a scalable system is a preferable choice as your company expands and you require more sophisticated features. To guarantee that only those who need access can access it, an inventory management system with the proper security measures is paramount.
Inventory management software is ideal for:
- automating processes,
- creating alerts,
- and providing reports for accurate planning and order fulfillment.
Report generation is crucial since it shows how stock is used and how long it is kept at each warehouse. To ensure you never run out of supply, it displays the amount of available stock and lets you set alerts to replace the necessities as needed.
Although you already have inventory management software, a backup plan is advisable in case of disruptions that could impact your operations. You can also use inventory software to see where you can save up and how much you spend on inventory.
3. Balance Stocks and Inventory Costs
Due to inadequate warehouse and inventory control, startups frequently fail because they can't keep up with the mounting inventory costs. Every company must know how to cut back on dead and obsolete inventory. One way to lower inventory costs is using inventory reports from an inventory management software system.
Through this, you will determine which products have a limited shelf life and need to be sold immediately and which can wait. Managing inventory with reliable strategies like software and planning will help you reduce inventory costs over time.
However, understocking will negatively affect consumer satisfaction. Instead, you must figure out how much inventory is anticipated to be sold and then budget for having that amount on hand.
4. Manage Supplier Relationships
Maintaining good relationships with suppliers is crucial to inventory control. You want to keep doing business with suppliers you can rely on to deliver supplies quickly in case an emergency arises.
If there is mutual trust and respect, bulk purchases from your supplier will result in savings and other benefits for you. For legal and clarity purposes, it is best to have a contract in place so that you both know what is expected of you.
Related: How Can Route Optimization Help Businesses Scale?
5. Use ABC Analysis
ABC analysis is one strategy you can use in a perpetual system. This uses the item's consumption value to classify inventory items. That value represents the entire cost of an inventory item used within a given period. The categories are represented by letters.
"A items" have the highest consumption values and will have a low number of highly consumable goods. "B items" have a larger consumption value than "C items" but a lower value than "A items."
The lowest consumption value is item C. This stock has little risk, but it also offers little reward. They frequently comprise a sizable amount of your stock.
Final Thoughts
Efficient inventory control is essential in your startup. It enables you to cut down on resources used for inventory control while optimizing your cash flow. By practicing the tips above, you can execute your inventory control plan that tracks your assets in real time and grant you access to and authority over your inventory.
Author: Hi, I’m Chatty. I am a writer from Manila. I find joy in inspiring and educating others through writing. Aside from my job as a language evaluator for local and international students, I spend my leisure time writing about various topics such as lifestyle, technology, and business.