12 Types of Inventory Control

1. Introduction:

Inventory control is a process whereby a company manages and monitors its stock levels in order to ensure that it has the right level of inventory to meet customer demand. It is important for businesses to have an effective inventory control policy in place in order to minimize the cost of inventory and maximize customer satisfaction. There are various methods that can be used to control inventory, such as FIFO (first in first out), re-ordering, visual inventory control, batch sizes, and perpetual inventory control.

2. What determines the success of a business?

There are several factors that determine the success of a business. These include the ease and efficiency with which it ensures its customers are served, coupled with its financial soundness. Other factors that play a role in determining the success of a business are its low inventory cost, low operating costs, and adherence to Pareto’s law.

3. Ease and efficiency in customer service:

One of the most important factors that determine the success of a business is the ease and efficiency with which it ensures its customers are served. Good customer service is essential for any business, as it is one of the main ways to keep customers happy and satisfied. In order for a business to provide good customer service, it needs to have a well-organized system in place so that customers can easily find what they are looking for and receive help when needed. Furthermore, businesses need to make sure that their employees are properly trained in customer service so that they can effectively assist customers.

4. Financial soundness of the business:

Another factor that determines the success of a business is its financial soundness. A business needs to be financially sound in order to be able to survive in the long run. To be financially sound, a business needs to generate enough revenue to cover its expenses and have some profit left over. Additionally, a business needs to have enough cash on hand to cover its short-term obligations. Furthermore, a business needs to have a good credit rating so that it can obtain loans from banks if needed.

5. Low inventory cost:

In order for a business to be successful, it needs to have low inventory cost. Inventory cost refers to the cost associated with storing and maintaining inventory. There are several ways to reduce inventory cost, such as reducing the number of items in inventory, reducing the lead time for orders, or reducing the cost of goods sold. Reducing inventory cost is important because it allows businesses to save money which can be used for other purposes such as marketing or expanding the business. Additionally, businesses with low inventory cost are less likely to experience stock-outs, which can lead to lost sales and displeased customers.

6. Low operating costs:

Operating costs refer to all the costs associated with running a business, such as rent, utilities, salaries, and marketing expenses. In order for a business to be successful, it needs to keep its operating costs low so that it can generate more profit. There are several ways to reduce operating costs, such as negotiating better lease terms, using energy-efficient products, or automating processes. Reducing operating costs is important because it allows businesses to save money which can be used for other purposes such as investing in new products or services or expanding the business. Additionally, businesses with low operating costs are more competitive and can charge lower prices for their products or services.

7. According to Pareto’s law:

Pareto’s law states that 80% of the effects come from 20% of the causes. This law can be applied to businesses in different ways. For example, 80% of a business’s sales may come from 20% of its customers. Additionally, 80% of a business’s inventory may be composed of 20% of its SKUs (stock keeping units). This law is important for businesses to understand because it helps them focus on the most important things that will have the biggest impact on their success. Additionally, by understanding Pareto’s law, businesses can make better decisions about where to allocate their resources.

8. The safety lead-time policy:

The safety lead-time policy is a method of inventory control that is used to avoid stock-outs. This policy involves adding an extra lead time to orders so that there is a safety buffer in case there are any delays in the manufacturing or delivery process. This policy is important because it helps businesses avoid lost sales and displeased customers. Additionally, this policy can help businesses save money by reducing the need to expedite orders.

9. Re-ordering:

Re-ordering is a method of inventory control that is used to replenish inventory levels when they reach a certain point. This point is known as the re-order point. When inventory levels reach the re-order point, businesses will place an order for more inventory so that they can maintain stock levels. This method is important because it helps businesses avoid stock-outs and keep inventory levels consistent. Additionally, this method can help businesses save money by reducing the need to expedite orders.

10. Visual inventory control:

Visual inventory control is a method of inventory control that uses visual cues to help keep track of inventory levels. This method can be used in conjunction with other methods, such as re-ordering, or it can be used as a standalone method. Visual inventory control is important because it helps businesses avoid stock-outs and keep track of inventory levels. Additionally, this method can help businesses save money by reducing the need to expedite orders.

11. Batch sizes:

Batch sizes are a type of inventory control that refers to the number of items that are ordered at one time. The size of the batch depends on the needs of the business and the availability of storage space. Smaller batch sizes are typically used for businesses with high turnover rates or when storage space is limited. Larger batch sizes are typically used for businesses with low turnover rates or when storage space is plentiful. Batch sizes are important because they help businesses save money by reducing the need to expedite orders and by reducing the cost of storing inventory.

12. Perpetual inventory control policy:

The perpetual inventory control policy is a type of inventory control that uses computerized systems to track inventory levels in real time. This system automatically adjustsinventory levels based on sales data so that businesses always have the right level ofinventory on hand. This system is important because it helps businesses avoid stock-outs and keep track of inventory levels in real time. Additionally, this system can help businesses save money by reducing the need to expedite orders and by reducing the cost of storing inventory.

FAQ

Some common inventory control policies and procedures include maintaining accurate records of inventory levels, conducting regular physical counts of inventory, setting minimum and maximum stock levels, and establishing reorder points.

It is important to have effective inventory control policies and procedures in place because they help ensure that businesses have the necessary supplies on hand to meet customer demand, while avoiding excess stock that can tie up working capital.

If inventory control policies and procedures are not followed properly, businesses may experience stock outs, which can lead to lost sales and unhappy customers. Excess inventory can also result in wasted storage space and higher carrying costs.

To ensure that their inventory control policies and procedures are effective, businesses should conduct regular audits of their stock levels and monitor their sales data to identify any trends or patterns that may indicate a need for adjustments.