Inventory control is a process that is vitally important to the success of any supply chain, handling any type of material or product, from consumer & manufactured goods to healthcare equipment and supplies.
Inventory control systems allow for important tasks such as product tracking or expiry management, by looking at many critical data points on every item in the supply chain, including: it’s location, the SKU, batch & lot number(s), expiry date (if applicable), how long the item has been in the system, and more. Having this data ensures visibility and allows you to more effectively manage your supply chain.
If your company is spending extra money due to lost products or unaccounted-for goods, the entire organization is affected.
Achieving and maintaining inventory accuracy is one of the most important functions of inventory control, contributing directly to the profitability of the entire organization. Unaccounted for inventory creates the need to carry additional goods, along with the associated warehousing and handling costs, both of which quickly eat away at profits. This will also have a direct impact on your customers’ satisfaction as orders go unfilled, wrong products are received, or orders are fulfilled late. In the case of retail store fulfillment, this could also translate into lost sales for a retail customer.
Every company strives for 100% Item Fill Rate (IFR), but this is not as easy as it sounds. A company may not be able to send out a product due to stock outs or items being unfit for sale (damaged or wrong specs). To ensure that the IFR is at high levels, many companies choose to pad their inventory levels. This is commonly referred to as “safety stock” and helps to ensure that as many orders as possible are being fulfilled. At first glance this may appear to provide a solution, but in reality it just hides inefficiencies in the supply chain; for example, you may not notice that your supplier is consistently late delivering inventory, or that you are over-carrying a significant amount of stock and your occupancy and labour costs are inflated because of higher storage and material handling fees to support the higher inventory level.
Supply chain planning
Knowing how much inventory to have on hand at a given point in time can be a major challenge for businesses. However, with accurate forecasting and planning, companies can decrease the uncertainty. There are many factors to consider when estimating the amount of inventory to maintain in order to meet your customers’ needs. Influencing factors will vary considerably for healthcare organizations, retailers, and technology businesses.
Inventory planning has a different focus depending on the stage of the product life cycle. For example, during the introduction phase, the supply chain must be able to handle rapid growth, whereas during maturity the supply chain priorities are on the ability to reduce cost and keep exact inventory. This can provide a level of uncertainty as the cycle may shift from the introduction phase to maturity phase very quickly or very slowly. The uncertainty level has been also rising due to the unknown timing of the decline stage. It has become harder to predict how long a product will stay in the maturity stage prior to entering the decline phase, and therefore planning the supply chain around the product life cycle has become increasingly difficult. However, with modern Enterprise Resource Planning (ERP) software, the ability to forecast demand has become more automated and with less deviation, allowing companies & organizations to improve the accuracy of inventory planning decisions.
Developing an overall inventory control strategy ensures supply chain transparency so that your investment in inventory is properly and efficiently managed. It’s vital to understand that an effective inventory control system can greatly reduce inventory errors by conducting regular cycle counts, telling you exactly where the inventory is in the warehouse, at any given time. This only becomes possible when the supply chain has a strict operational process that encourages regular inventory checks. This ensures that the warehouse management system (WMS) is accurately tracking inventory at all times and that orders are being fulfilled and waste is at a minimum.
SCI understands all the complexities involved with creating, deploying and managing medium and large-scale inventory management systems, and we provide solutions that take that burden away from your business, allowing your whole organization to focus on the things that make you money. SCI promises a 99.9% inventory accuracy rate and 99.9% order fulfillment rate.
If you’re looking to make changes to your supply chain and would like to explore our inventory control processes, contact us today. We’re here to answer any questions you might have, and see how we can help.