Inventory Management: How to Control your Inventory

by. Onvia

Inventory control involves keeping a good balance - you’ll need to get rid of the items that are obsolete or unwanted, and keep your in-demand items in stock. There are plenty of inventory management methods to make sure that you meet your clients’ needs, especially if you’re a small business.

Goals of Inventory Control
The idea behind inventory control is to find out the minimum annual cost possible related to ordering and stocking each of your items.

Inventory Control Methods that Work Well for Small Businesses

1. Visual Control –Eye ball your inventory to examine the need for additional inventory. Keep in mind that this inventory management method works best if you have a small business.
2. Tickler Control – Physically count your inventory every day.
3. Click Sheet Control – Record your inventory items on a sheet of paper for reordering purposes.
4. Stub Control – This inventory control method is used by retailers and allows a manager to record inventory by taking a portion of the price ticket when the item is sold.
5. For larger businesses, you will need a more technical and sophisticated form of inventory control. You’re more likely to rely on software and computers for your inventory control and accounting / billing procedures.
6. Inventory Management for Larger Companies Utilizing Computer-Based Systems
7. Point-of-sale terminals – After each inventory item is sold, the information is tracked and the manager receives regular inventory management report print outs for review.
8. Off-line point-of-sale – This inventory control method is much like the point-of-sale terminals, except that the information is tracked by the supplier. Based on the tracked information, the supplier will ship additional items when needed.
9. Outside Agency – This method takes a lot of responsibility off your shoulders. Instead of tracking/monitoring the inventory managment data yourself, a manufacturer’s representative can visit on a regular basis to track your stock count and write up any reorders. Merchandise that is out of date can also be removed or returned to a manufacturer (if applicable), following a predetermined, authorized procedure.
   

There are two major control values in place:
1) Order Quantity: frequency and size of orders
2) Minimum Stock Level: the reorder point at which replenishment is needed

You may be familiar with the Economic Order Quantity formula (EOQ). This formula is widely used to figure out the minimum annual cost of stocking and ordering each item. Taken into account with the EOQ is the annual sales rate, the cost of placing any orders, the unit cost, and the cost of carrying inventory.