As a business person, you don't want a situation where your stock level either exceeds or is way less than the customer demand.
The merchandising process should be optimized in such a way that the available stock meets consumer demands without excess or deficiencies. This is where inventory control comes in – it allows you to track stock levels while keeping an eye on customer demand, ensuring optimal business performance.
When you're able to meet this demand optimally, you avoid chances of over or understocking, theft and damage, and so much more. As technology has evolved, it's become even easier to keep track of your stock levels amid varying customer demands.
A manufacturing inventory software, for example, can allow you to manage your stock more accurately, especially because it offers real-time data that makes the process even more efficient. Regardless of your business size – whether large or small – the importance of inventory control can never be overstated. Read on to gather more insights.
Reducing Overstock and Understock: Balancing Supply and Demand
As you've already read in the introduction, inventory control is a great way to avoid over or understocking. When done right, this mechanism can save a company up to 10% of inventory costs.
When there's too much inventory, you can end up restricting your business' capital and miss out on opportunities for growth and expansion. Walmart, for example, lost a chance of making $3 billion worth of sales in 2014 due to stockouts that arose from insufficient inventory control measures.
Inventory control has an integral part, supply chain management (SCM), which ensures a proper flow of inventory to the point where the organization or buyers consume the products. As a report by ADS suggested, 79% of companies that establish efficient SCMs often experience more-than-average revenue growth within their industrial sectors. Inventory control can help to improve your profits while enhancing customer satisfaction.
If you are looking to improve the accuracy of your record levels, then inventory control is the way to go. Actually for retail businesses, inventory is only accurate for up to 63% of the time.
With better control, you can always be sure that customers are receiving high-quality products – which is a plus. Zonka Feedback demonstrated that 69% of customers who find satisfactory products tend to shop more consistently.
Ensuring that customers can find their needed products any time they want them can greatly add to your sustainability. Stockouts are to be avoided as research has indicated that convenience stores could lose one in 100 customers completely due to such experiences. Plus, up to 55% of customers are not willing to shop for an alternative product if their regular item is out of supply.
Minimizing Waste with Precise Inventory Control
Especially during instances where you overstock or hoard large amounts of products, a good percentage of these items might go unsold or out of date. As a result, the environment has to deal with the pressures of dumping, resource depletion, carbon emissions, and so on.
If companies can handle and manage their inventory properly, it eliminates the need to construct sizable warehouses to store excess products. Mark you; these warehouses contribute to the overall carbon footprint of buildings as they consume large amounts of energy.
Just recently, in early 2024, DAA Capital Partners did a write-up that showed that warehouses accounted for 11% of global greenhouse gas emissions. To add on the emissions from the warehouses, you'll also have to deal with the discharges from the transport sector – moving the surplus inventory occasioned by overstocking increases the distance traveled and, thus, the carbon released.
These parts of the many side effects of overstocking suggest the critical importance of implementing precise inventory control. The Just-in-Time (JIT) method, for example, ensures no excesses as goods are only received in production when needed.
With ABC analysis, you can partition the inventory into three categories depending on their importance and volume. Other methods like First In, First Out (FIFO) and Last In, First Out (LIFO) streamline operations by managing the valuation of stock.
Best Practices for Implementing Precise Inventory Control
For those who are wondering about how to get started, these practices will help you to develop an effective system:
*Ensure you have an organized floor plan: You can achieve this by using proper labels and signage and placing the most popular items closer to the shipping area. A labeling software can come in handy when you need to print the tags. Plus, you can consider other tools like RFID systems to help you in real-time control.
*Take advantage of cycle counting: This can help you identify inaccuracies quickly since you count items in small sections rather than counting them all at once.
*Implement warehouse management systems: In a world where so many factors affect customer demand, nothing beats the power of real-time tracking. Plus, with these management systems, the chances of human error are minimal.
Undoubtedly, businesses that ensure their stock levels align with customer demands without compromising satisfaction have a great opportunity to improve their competitiveness. This is so because customers are always assured of finding their regular products. As more consumers are becoming environmentally conscious, precise inventory control ensures that you can improve your appeal to such shoppers.