Inventory control: tools, benefits and methods for effective inventory management

The efficient management of a business involves a multitude of tasks. However, if there is one element that you cannot afford to neglect, it is inventory control. This system helps ensure the efficient management of stock in a warehouse.

Imagine having a constant flow of customers but not having enough stock to meet their demand. Or worse, investing resources in an excess of products that you can't sell. Both scenarios are recipes for financial disaster and customer dissatisfaction.

In this article, we'll address the fundamental pillars of effective inventory control management and you'll learn why it's crucial to your success in operations.

Why is good inventory management important?

An effective inventory system is more than a good business practice; it's a requirement to keep your business running smoothly.

By having a robust inventory system, you can balance the amount of stock you have, ensuring that there is always enough to meet demand without incurring additional costs for overstocking.

In addition, it allows you to make better decisions and save on costs by not having to deal with excess or shortage of merchandise.

Good inventory management helps you to:

• Provide a good customer experience as you can fulfill the orders they place, responding to their demand at the time they request it.

• Improve cash flow by having only the necessary stock and being able to invest in other business areas without having the money stagnant in merchandise that does not move.

• Avoid losses by buying too much and having it shrink or become obsolete over time.

Benefits of effective inventory control

Understanding the benefits of a good inventory control system is essential for any company that wants to thrive in a competitive environment. Here is a detailed list of advantages you can expect.

Reduced costs and expenses

One of the most tangible advantages is the reduction in storage costs and expenses.

By maintaining an optimized inventory, you avoid the risk of having too much stock, which often leads to additional storage costs and risk of obsolescence.

In addition, by having a clear record of what you have and what you need, you minimize unnecessary and duplicate purchases.

Optimizing working capital

Working capital is like the fuel that drives your business. By having an optimized inventory, you free up funds that would otherwise be tied up in unsold products.

This freed-up capital can be used to invest in other areas of the business, such as expansion, staffing or new product development.

Improved sales and service levels

Having the right products at the right time and in the right place not only improves operational efficiency, but leads to increased customer satisfaction and, ultimately, increased sales.

This positive impact on service levels translates into higher revenues and, therefore, greater profitability for your business.

Operational Excellence

By automating and optimizing inventory processes, you enable your business to run like a well-oiled machine. This operational efficiency translates into a more streamlined workflow, allowing your team to focus on activities that add value to the business.

Data-driven decision making

In the modern business world, analytics and data are gold. A robust inventory system gives you a wealth of real-time information that can be used to make projections, identify market trends and make informed strategic decisions.

Improved supply chain management

Good inventory management goes beyond your business; it affects your entire supply chain.

By maintaining an optimized inventory, you improve synchronization with your suppliers and logistics partners, making your supply chain more efficient and resilient.

Inventory control tools

Having the right tools to manage your inventory is a must, as they allow automating processes or tedious tasks and offer a clearer and real-time view of your stock. Below, we will explore some of the most effective tools for successful inventory management.

1. Software and applications

Inventory management software has revolutionized the way companies manage their stock.

From cloud applications to on-premise solutions, these platforms offer a range of functionality such as real-time tracking, analytical reporting and order automation.

2. Barcode scanners

Barcode scanners are devices that significantly streamline the inventory process.

By enabling fast and accurate product identification, these tools minimize human error and speed up processes such as goods receiving, order picking, and packing. They are especially useful in large and complex warehousing environments.

3. Analysis and KPI's

Knowing your numbers is crucial to any inventory management strategy. Key performance indicators (KPIs) such as inventory turns, order accuracy rate and cycle time help measure the effectiveness of your operations.

Advanced analysis tools can provide deeper insights, allowing you to adjust your strategies accordingly.

How to have good inventory control

Effective inventory control is not only achieved with a good strategy and the right tools. It also requires the implementation of specific methods and processes that address various areas of your operation.

Let's take a look at the elements that we consider key to effective inventory management and that should be taken into account in any plan focused on this objective.

Correct layout for demand planning

Warehouse layout is the first step to efficient inventory management.

A well-planned layout facilitates access to best-selling products and optimizes the workflow, which is crucial to effectively meet demand.

In this sense, it is important to implement the S&OP (Sales and operations planning) model to achieve better assertiveness between demand and production and, therefore, increase customer satisfaction.

Likewise, agreements must be established between the areas so that they can be fulfilled within the chain on time.

Supply planning

Supply planning is essential to ensure that you have the stock you need to meet demand. This involves a detailed analysis of sales trends, seasonality and other factors that affect your inventory.

This will help to have a purchasing plan model for an efficient negotiation with suppliers, taking into account maximum inventory, minimum inventory, expected demand, etc.

Receiving Plan

The receiving plan ranges from weekly planning of warehouse operations to standardization of the receiving model and quality policies.

It also involves coordinating logistics, such as unloading schedules and pallet availability, to ensure an efficient flow of goods.

Layout Optimization

In addition to the initial design, the warehouse layout should be reviewed and adjusted periodically to adapt to changes in demand, new products and other factors that may arise.

Care should always be taken that these changes help to improve location interaction, have a better analysis of product volumetrics and space, as well as an adequate storage infrastructure.

Inventory and quality control

This method involves reinforcing the processes of incoming and outgoing products, strengthening rotation policies such as:

• FIFO: this method assumes that the products that were purchased or manufactured first are also the first to be sold. In other words, the oldest products are sold before the newest ones.
• FEFO: focus on selling products that are closest to their expiration date first.

And perform regular audits to ensure that best storage practices are maintained.

Inventory management

Beyond basic control, inventory management involves constant monitoring and adaptation to changes in market conditions, including the implementation of cyclical inventories according to the classification of products into A, B, C categories.

Staff productivity

Staff efficiency is key to effective inventory management. This involves everything from capacity planning to task allocation, all with the goal of maximizing productivity.

Implementation of 5 S's Methodology

The 5 S's methodology focuses on classification, organization, cleanliness and discipline to keep the warehouse in optimal conditions.

This is a technique that has proven to be very effective in optimizing operations.

Active monitoring

Active monitoring involves continuous monitoring of inventory performance and adaptation to changing conditions. This ensures that any problems are identified and addressed proactively.

Transform inventory management into a strategic asset with London Consulting Group

Inventory management is not just another operational task; it is a strategic pillar that directly impacts a company's profitability and sustainability.

At London Consulting Group we understand this perfectly and offer a series of methods and tools to optimize this vital aspect of the business. From demand planning and sourcing to the implementation of quality and control policies, each step is designed to align inventory with overall business goals.

The application of methods such as FIFO and FEFO demonstrates how a thoughtful approach can minimize waste and maximize efficiency. Similarly, the use of modern technologies and KPI-based analytics enables companies to adapt to changing market conditions with agility.

Start transforming and leveraging inventory control. Contact us!