Inventory and stock control systems help businesses monitor and track the quantity of raw materials, finished goods, and work-in-process inventory they have on hand at all times. Businesses rely on information from inventory control systems to make purchasing decisions, schedule production, and determine warehousing needs. Accurate inventory systems help small businesses keep costs low and efficiently supply products to meet customer demand.
These are important aspects of inventory management.
1. Quality
Inventory control systems track quantities, but businesses can also use them to track batch numbers of raw materials and finished products. Batch tracking allows businesses to monitor materials throughout the production process. When a company discovers quality issues or defects, the tracking system allows the business to isolate the raw materials and finished products that may contain the faulty material. The tracking system also allows businesses to work with suppliers to identify the defective material.
Inventory control can also allow businesses to track the shelf life of materials. Businesses using inventory control systems can ensure the company uses materials on a rotational basis according to their expiration dates. Inventory and warehousing control systems must provide an effective method for employees to identify and retrieve old inventory before its expiration date.
2. Purchase
An effective inventory control system is crucial to purchasing operations within a business. Buyers rely on accurate inventory data to determine when to purchase raw materials. When inventory information is inaccurate, buyers may purchase too much or too little of the necessary materials.
Inventory control systems can use triggers to signal buyers that it's time to replenish the company's inventory. Inventory levels are one of the triggers buyers use to determine when to purchase additional stock. Inventory levels are the amount of inventory a company holds at any given time. Businesses can use usage data and the time it takes to receive additional stock to set inventory levels. When the quantity on hand reaches the inventory level, buyers purchase additional stock.
Insufficient inventory to meet customer demand can lead to delayed deliveries and financial losses for a company. Over-stocking wastes warehouse space and tightens the company's cash flow.
3. Transportation
An inventory and warehousing control system used by a business also tracks finished goods, which the shipping department uses to track and store finished products. A quality inventory and warehousing control system allows the shipping department to deliver products to customers efficiently and on time.
4. Cost
Storing raw materials and finished goods incurs costs for a business. Inventory and warehousing control systems can help manage costs by controlling the amount of materials a business must keep on hand. Some businesses use lean systems, maintaining a minimum inventory level to keep inventory and warehousing costs low. A company with a lean inventory system only purchases materials when there is customer demand. Lean inventory minimizes raw material, warehousing, and material handling costs.
However, delays in deliveries from suppliers or unexpected increases in customer demand can lead to late deliveries or business losses for a company using a lean inventory system.