Stock control and inventory management are terms used all the time in business. Everyone talks about them – but what do they actually mean in practice? In this quick guide, you’ll find a simple introduction to these concepts, as well as five simple tips to help you manage stock levels for your business more effectively.
What is stock control?
So what is stock control? The term refers to the management of your company’s stock levels to the best effect. This covers knowing your stock levels at any moment in time, as well as keeping track of them. Effective stock control ensures that you don’t have too much stock sitting idle, or so little stock that you can’t satisfy your customers. It lets you deal with any supply chain problems that may occur, and it stops you from using your business’ resources on things you don’t actually need. In short, it’s a tried-and-tested way to make your business more efficient and to help its growth and profitability.
An introduction to inventory management
Inventory management, also called inventory control, is making sure you have the right amount of stock available at all times. That covers everything from raw materials to finished products. The aim is to have the ideal level at every stage of the production process. Effective inventory management also means stock being available at the right cost and selling price. As a vital part of your supply chain, it includes purchasing materials from your suppliers and keeping track of sales to customers. For SMEs, this is often accomplished with basic tools like Microsoft Excel, but using dedicated inventory management software can offer a more powerful and flexible alternative.
Checklist for an effective inventory management
Have a consistent routine
Auditing your inventory is crucial in ensuring that your marketing campaigns and ordering plans match up with the stock you have. Depending on your industry, you may find it appropriate to do this once a year, once a month or even once a week. But whatever you choose, stick to it; this will minimise mistakes and forgetfulness. The same advice applies to receiving stock. Make sure everyone with responsibility for receiving goods shares a clear, consistent plan for doing so. This should include how you check received consignments for accuracy – if everyone’s doing it the same way, discrepancies will be much easier to spot
Keep track of sales
This means more than just knowing how many units of a product you’ve sold each day. You’ll want to be able to say which items sold, who they sold to and how that affects your stock levels. Even more helpful is being able to analyse the raw data, something good inventory management packages package are ideal for. Do you sell more of certain products at certain times of year, such as in the summer or coming up to Christmas? Do a lot of your customers buy item A at the same time as item B? You’ll want to be able to understand your data, not merely record it
You won’t need to reorder some products as quickly as others, so knowing which item fits into which category can save you from ordering stock you don’t need – or from having slow-moving products sitting in storage. A common approach is to use the ABC method. In category A, you’ll place high-value, low-quantity items. They may not sell very often, but when they do your balance sheet will know about it. B items have medium value but are likely to shift a bit faster. Items in the C group are lowest in value, but they’re likely to turn over at a faster rate.
Use the right inventory management software
When you started your business, and maybe for some time after that, you could probably manage with manual management of your inventory. Using simple spreadsheets such as Google Sheets did the job, so why change now? Simply because, as your business grows, doing everything yourself isn’t an option anymore. Decide on the features you need, such as cloud-based facilities, before you buy inventory management software. Doing this will make sure of getting the package that meets your needs at the right price.
First In, First Out
Commonly known as the FIFO method, this is pretty much what it says. It simply means that you should aim to prioritise selling the stock you’ve had for the longest period.
Exactly how vital this is will depend on your industry, as fresh food will be unsaleable after a few days whereas computer peripherals will have a much longer shelf life. Even for those, though, following FIFO is generally good practice. Even when you store products carefully, there’s always a slight risk of damage, and that increases for every day they’re in your warehouse or stockroom.
Although stock control and inventory management may seem difficult concepts to get to grips with, a lot of them are simply good business sense.