How to Have Good Inventory Control
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Implementing Inventory Control Systems
Companies know that they can incur thousands of dollars in losses every year if they lack good inventory control. Keeping track of inventory is the building block to assuring your business stays on top of its expenses when it comes to important materials needed to manufacture your product. There are some ways to be certain you have good inventory control and don’t lose sight of it. The first thing to remember is to always try to rotate your stock, meaning that older stock should be “moved” or sold first, so that fresh stock is always right behind. This is called the FIFO, or First in First out method. When analyzing your inventory control, consider two important factors: time and cost. How much time is being taken out of your day to place orders and track inventory? Are you using the quickest, most effective methods possible to ensure inventory accuracy? How much money has been spent on inventory control equipment, software, and employee training? Brainstorm ways that you can both gain more time to attend to other important business matters and ways you can cut costs to improve profit margins while keeping up with good inventory statistics.
Remove Dead Stock
If you are a store owner, you should consider several different things when thinking about inventory control. The first is to remember that items that are not moving off the shelves should be either placed on sale or removed completely. You want to only keep items that sell in stock, otherwise you will have nothing but “dead stock” sitting on your shelves, while you are making minimal profit. Next, think about which items you carry produce the largest amount of profit. If you’re paying close to retail for items and cannot afford to bump the price tag up, consider purchasing larger amounts of less expensive items, and then marking them up in order to turn a profit. Analyze who you are buying your goods from, and be sure you’re getting the best deal possible for the highest quality goods available. You don’t want to sell your customers short, either.
Plan and Document
The real secret to good inventory control is planning and documenting. Make a spreadsheet and organize your stock, item numbers, profit margins, and pricing by month. Then track what you will want to purchase in which months, and what sells the best. This can be a terrific tool for guiding you in the right direction of what you’ll want to buy inventory-wise throughout the year. Planning ahead can really save a lot of money in the long run. There is a common formula that many merchants use called the OTB, or Open to Buy formula. The formula is simple; just add the planned markdown sales plus the planned end of month inventory. Then subtract your planned beginning of the month inventory from this total, and you should have a fairly accurate idea of what you’ll need to purchase for that particular month, quarter, or even year, depending on how you want to purchase. With a little bit of tweaking and some trial and error, you should be able to practice good inventory control methods with little money lost.