Inventory control software is used in organizations all across the globe to improve ROIs and lower overheads. Although inventory can seem so unsubstantial, businesses must understand the importance of managing it well in the grand scheme of things. What lies at the core of good inventory management is a detailed insight into your stock, reports on usage patterns, and the ability to manage that data quickly and effectively.
When you implement inventory control methods, your business is fed with the much-needed fodder to fire up the cannon of stock optimization, and also by fulfilling vital demands of employees and customers. The marketplace today has completely changed. Customers simply don’t hesitate to share poor service experiences on social media. Even worse, they can easily switch over to some other company through a single click. For employees, on the other hand, limited access to resources needed to get their jobs done can significantly lower productivity, and cause blockages in operational processes.
Inventory control software and optimization strategies
Optimization strategies are of immense importance for the economic health of your company. Failure to practice effective inventory control can cause bloated inventory, loss of customers, and employee cutbacks. A lot of the businesses out there empty their pockets to upgrade less important systems and yet turn a blind eye towards inventory management altogether. Investing in inventory control software can do wonders for businesses as it automates a lot of things which are usually done manually and are prone to errors and guess games. In fact, many of the existing challenges businesses commonly face can be avoided if inventory control methods were executed in the first place, and executed well.
Being a business owner, you don’t want your company to become stagnant. You want it to grow and flourish, and good inventory management can often play a huge role in that – helping you expand your operations, giving you flexibility, and enabling your employees to be more productive. Below are 6 fool-proof ways companies can use inventory control software for stock optimization and increased profits. To find the best approach for your business, you will need a good balance of all the methods listed below.
Maintaining a Perpetual Inventory System
Also called the automatic inventory system, this method will allow you to exercise better control over your inventory. You can keep track of the quantity and value of each item in your stock, and bring up reports on the history and usage of all your inventory. Inventory control software is a great tool for this, as its main purpose is to give you accurate information about the stock level of each and every item at any given time. By updating your inventory records after each purchase, sale, or consumption activity, the technique ensures that you’re up-to-date throughout any procurement or maintenance processes.
You don’t need to physically stalk your stock anymore as the software provides you with all the information you need without sifting through tedious spreadsheets or compiling data from various sources. You can regularly verify if the physical stock is in line with the records kept at the stores. An audit in this vein becomes even easier with an inventory control app – just open up the built-in label scanner and run through hundreds of asset tags in just minutes!
67% of warehouses plan to use mobile devices to manage inventory.
Source: Motorola
Automate demand forecasting
A big part of good inventory management is predicting demand accurately. This is quite a tough job to do as it takes into account different external factors like market trends, seasonal demand, yearly growth rate, past sales during similar quarters, economic conditions, upcoming promotions, and other business trends. With so many variables involved, it can become difficult to predict demand accurately.
By using inventory control software, you can automate demand forecasting and cancel out all the guesswork. This will make the task of demand forecasting easier and more accurate. It will automatically calculate an inventory item’s demand based on the historical sales or consumption data, and ensure that the maximum and minimum order quantities are at their optimum. By calculating specific demand patterns, this kind of system ensures that demand and replenishment practices are always in line with each other. Under-stocking or over-stocking can then become a thing of the past, and you can have a much leaner inventory control system at your very fingertips – and all with minimal effort on your end!
You can track inventory demand patterns on the basis of historical data
Learn from your Inventory Turnover Ratio
For those in sales, this ratio helps to calculate how fast inventory is used up (or turned over) in a particular period of time. The higher the ratio, the shorter the shelf life of the inventory item. This, in turn, means a higher sales volume, which is particularly important for companies with low-profit margins. Inventory turnover for each inventory item should be closely monitored. Over a period of time, a product’s demand fluctuates and results in variability in the supply chain. If something isn’t turning over as fast as you’d wish, inventory control software can point you towards areas that could use some tweaking. Perhaps you’re over-ordering a particular item, or perhaps that item hasn’t been updated in a while. All this information can improve your operational processes and help you optimize inventory seamlessly.
U.S. retailers are sitting on about $1.43 in inventory for every $1 of sales.
Source: Supply Chain Digest
Keeping a track of demand patterns is another way of making sure that product replenishment calculations are accurate. Comparing the inventory turnover ratios of an item with those from the previous years will unveil four categories that you can learn from:
- Slow-moving inventory
- Dormant inventory
- Obsolete inventory
- Fast-moving inventory
Out of these, fast-moving inventory is one with hot demand, while the obsolete type should be scrapped immediately. Decision making on all four types of inventories becomes easier using turnover ratios, which is something that can be calculated quickly with inventory control software.
Use turnover ratios to gauge the efficiency of material management
Organize better with ABC Classification
Some products require more attention compared to others. Using ABC analysis helps to prioritize inventory management. You can classify products into ones that need more attention, and ones that don’t. The fastest moving products in your inventory should be placed nearest to the shipping, staging and receiving sites. This helps optimize workflows and saves you both time and effort in getting the right products across at the right time.
You need to optimize the way you lay out your warehouse as well, because the majority of the picking necessarily takes place there. Once the warehouse is optimized, it will take less time to search for the required products. This will become even easier with an inventory control software, as you can simply search for an item on the system and find out exactly where in the warehouse that item is located.
The number of warehouses in the U.S. has risen 6.8% over the last five years.
Source: Bureau of Labor Statistics
Using an inventory control platform, you can add all your products to one of three groups:
- A) High-value products with a low frequency of sales
- B) Moderate value products with a moderate frequency of sales
- C) Low-value products with a high frequency of sales
Demand for products from each category will keep changing with time. When the demand decreases, the products should be de-prioritized to make space for those that have a higher inventory turnover, or for new products that have a high demand.
Create optimized purchase models
If you want to make sure that your inventory is under control, the management needs to implement purchasing procedures that are in line with demand pattern data and actual sales or usage history. If the inventory items have not been sold or used for the last 12 months, or if they have since exceeded their sell-by or use-by dates, they should fall into the category of obsolete stock. The obsolete stock should be immediately unloaded, and replaced with products that do better to help lower the cost of storing inventory.
A centralized inventory management system can, therefore, help companies keep constant track of inventory levels and prepare for unexpected events. Understocking and overstocking can also be readily avoided by keeping a watch on demand patterns.
Power up your inventory management methods
Let’s face the truth: You might be able to control your inventory manually if you only have a handful of office items or home-products to keep track of, but for businesses operating on a large scale, this is sure to fail. You’ll simply end up fighting an uphill battle. By using an efficient inventory management solution, you step into the war zone that is the marketplace or workplace armed with the best technology has to offer you. It will highlight the financial impact of your inventory management methods and help you make better decisions, every time.
Inventory control software is, therefore, a necessity if you want effective inventory forecasting, replenishment, and planning. It helps make your operations leaner and more efficient by saving costs and elevating service levels, and comes bundled with all the essentials to control your inventory for stock optimization!
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EZOfficeInventory is a popular asset tracking software that SMBs and enterprises utilize to track and manage their inventory seamlessly. For more assistance, drop us an email at support@ezo.io
