Consider that your inventory system shows 120 of some product on-hand, but a worker can only identify 95. Your customers may have to wait later for an order to be delivered, buying decisions may be wrong, and time is spent digging why there aren't enough of a particular product.
You understand that you may have too much inventory or not enough in your inventory control to reflect your actual level of stock.
Inventory control allows a company to track what product is going in and out and is a critical aspect of many businesses. Utilizing technology can assist in the operations performed, but the actual contents and reliability need to be correct as well to help maintain control.
What Is Inventory Control
Inventory control is a process where businesses monitor the goods coming into the firm, going out, and physically on-hand in order to meet demand. It includes such operations as inventory management and the recording of inventory sales, purchases and returns, shipments to other locations, inventory counting practices, and reorders. Whereas inventory control deals with the management and monitoring of items on-hand, inventory management can include estimating the demand of a product and purchasing arrangements.
At a retail level, maintaining inventory ensures that items listed as in stock are indeed present and can be readily sold on demand. As a warehouse, the proper oversight can allow the workers knowing where and what items are available for picking and shipping. For a manufacturing facility, the control over their raw materials and supply resources may be a major aspect of keeping its operations running. The ultimate objective is inventory information that is reliable and maintains a balance between being able to fulfill orders and not spend extra unnecessarily on storage and purchases.
Why Can Inventory Records Be Inaccurate?
Having inventory records not reflect the actual figures can happen in variety of ways:
- Good may be received before they are recorded
- Incorrect amounts manually entered
- Stock shifted in the warehouse between locations but not designated in inventory
- Returned goods or items disposed of wrongly marked
- Goods inaccurately logged, whether similar products recorded incorrectly with its details or simple typos
inventory counted at infrequent times allowing mistakes to go unnoticed or undiscovered until later.
Inventory counting software may add complications for a business if the recorded amount in files are incorrect or employees enter the numbers incorrectly and inconsistently throughout a process.
A good inventory control system begins by having procedures and policies on documenting all processes related to the goods on-hand.
How Can Technology Assist in Keeping Inventory Control
1. A centralized inventory record
Using inventory systems can give different departments and employees one source representing product availability, locations, shipment, and related activities. Such a centralized database helps to have a uniform source of inventory information instead of multiple people having spreadsheets or a mix of manual entries and computer data sources. When working out of multiple facilities, the information can also help to see if a stock item is available elsewhere and if it's more practical to transfer some goods rather than buy new stock at a retail location.
The accuracy of this data is tied to the correct and timely recording of all transactions.
2. Barcode scanning and cell phone use for inventory
Bar codes allow the identification of items during receiving, processing, stock counting, shipping, and other operations. Cell phone scanning can make the recording of items faster and easier and prevent issues such as incorrect transcription found by using a hand written or manual entry into spreadsheets.
As an example, in receiving, a employee receives a pallet of stock. After scanning each item or case on the shipment, the quantity scanned will be compared with the purchase order for accuracy in the receipt of goods. Using an integrated scanning procedure in an inventory system helps streamline the receiving process and makes mistakes less frequent.
3. RFID for applicable operations
Radio-frequency identification takes advantage of tag-reader technology to recognize any tag that is compatible with the reader. Whereas barcoding and scanning requires reading of each item, RFID can be used under various settings depending on the type of reader and tags utilized. The technology can be used for identifying items and movement in inventory, counting, and other activities.
The decision on RFID comes down to whether the benefit outweighs the implementation and use cost. As with other technology, it's important to assess current procedures and how they're helped by inventory solutions.
4. Point of sale and e-commerce integration for proper sales records
When an item is sold, its' record must be updated in inventory to indicate fewer items. Failure to integrate POS or other sales channels and inventory software can cause problems where an item is displayed as available when in fact it's sold out. Making sure that any sales channel is linked into inventory is a critical first step in keeping proper records. There are exceptions and workarounds for refunds, cancellations, exchanges, or overrides, but having sales figures be integrated will be critical to having accurate data in inventory.
5. Reorder advice reports and inventory analysis for purchases
Inventory systems can be programmed to advise when an item should be re-ordered, usually when it reaches a reorder point. A simple reorder calculation is as follows:
Average daily demand x supplier lead time + safety stock = reorder point
This means that with a daily usage of 12 units, and a supplier lead time of 4 days, expected usage would be 48 units. If a company holds 10 units of the product for safety, their reorder point would be 58. The assumption would be that the daily usage and days in transit can be anticipated. The calculation may not account for fluctuations in sales volume as well as delays in supply and the quantity needed to meet minimums for ordering.
Reports from inventory systems can also help with analyzing which items are stagnant in stock, consistently low and requiring attention, and items with inventory issues that tend to be incorrect.
A Practical Example: Investigating a Stock Discrepancy
Say your system shows 120 units, but upon inventory count, your employee only finds 95. The missing 25 units have to be investigated to see what happened to them.
Step 1: Check transactions recently made and see if you find evidence of an entry error, an omission in a sale or transfer between locations.
**Step 2: **Look at any movement of goods to ensure that the goods were properly recorded as shipped or transferred.
Step 3: Check any receivings performed and ensure that the quantity entered was properly received.
Step 4: Do a recount of the on-hand stock, and check for any quantity that was misplaced in other storage areas.
Step 5: Adjust figures and document the correction accordingly.
Step 6: Make sure there isn't a systematic reason for missing stock that would require more permanent procedures change rather than just fixing a particular issue.
Maintaining a documentation trail to support the audit and finding any patterns of issues help to ensure that inventory records are correct.
Choosing the Perfect Inventory Technology for Your Business Requirements
There are many varying possibilities of systems that can be put in place for recording inventory and ensuring product availability is known reliably. This can range from a small retail store that wants to have a system where the products are well-organized and maintain basic warnings for reordering through a warehouse business that needs to have tracking at hand for multiple locations and integration. Some factors to consider include:
What business requirements need to be supported and is there an existing inventory method should be taken full advantage of or enhanced.
Scalability: Will it grow with the number of products or facilities added?
Integration: Can it interoperate with other systems such as POS and accounting software, and support such sales aspects as web stores?
**User-friendliness: **Can most employees can perform core transaction tasks without advanced training?
Reporting: Can it help in reporting and maintaining data that assists companies in decisionmaking, purchasing decisions, and other procedures?
Cost: The combined software or hardware costs shouldn't outweigh the potential benefits and other options.
As businesses consider methods of recording transactions and staying on top of inventory, they should research the options for their business needs. With a solid understanding of how they operate and what they desire, companies are advised to visit (https://theinventorymaster.com/) for an initial examination.
How Can Technology Assist Companies Improve Their Control Before Adopting Inventory Automation
Technology can become more effective when there is knowledge as to how the process works, and automation doesn't hide or overlook issues. Before companies start putting in place new inventory methods and procedures, they should take the time to:
Standardize product documentation, such as names and other attributes so they follow consistent guidelines.
Document all transactions for proper recording and have clear guidelines of how things are done.
Establish a cycle counting program and review quantities on a rotating basis versus annually.
Identify the causes of discrepancies in order to make sure the problems aren't consistently overlooked.
Assign responsibilities for maintaining records as well as reviewing any corrections made.
Examine errors occurring and work on process improvement rather than continually trying to fix them.
Start with an area of concern such as discrepancy of products or shortages in order to test and adjust procedures. Measure and analyze if changes help maintain consistent, accurate records.
Final Thoughts
Having accurate inventory requires companies to have reliable records of transactions, consistent procedures, and a method that can be easily utilized to confirm quantity on hand versus what is recorded. Maintaining these three objectives, along with implementing such tools for centralized records, scanning items, and RFID or POS interfacing, are the best ways to ensure inventory records. Their true value is realized when they can assist businesses to ensure inventory figures are up-to-date and trustworthy.
Discussion: What are the main causes of inventory discrepancies discovered by you or your peers: entry inaccuracies, lack of recording or transfer of goods, system inconsistency of multiple applications, or something else?
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