Managing inventory is an integral part of any e-commerce business. Picking the right approach helps ensure you have what you need when you need it so you don’t end up scrambling to fulfill orders. With an accurate inventory count system in place, you can accomplish two things—it can lower costs and increase your sales, all because you’ve got the right stock at hand. An inventory control system is the key to simplifying and automating everything from your stock control system to restocking.
Inventory control is something that can really make or break your business, and it's not just about keeping track of products. For people working in supply chains, this system is actually pretty useful for making smarter calls about resources, components, and maintenance. However, there are different systems out there, and each one has its strengths. You’ve got to figure out which one is going to work best for your business. After all, what works for one company might not exactly fit the next. Let’s understand inventory control systems and help you make this decision.
What Exactly Is an Inventory Control System?
Inventory control is the physical tracking of inventory by employees within the organization. An inventory control system is a tech solution that helps businesses manage and track their products throughout the supply chain. It integrates purchasing, shipping, receiving, warehousing, and returns. The best part is that it automates many of the manual tasks, making inventory management much more efficient.
Features of Inventory Control System
Here are the main components of an inventory control system:
- Demand Forecasting: Uses past data, trends, and models to predict future demand, helping avoid stockouts or overstocking.
- Stock Replenishment: Ensures timely ordering of inventory using methods like EOQ, reorder points, and safety stock.
- Inventory Tracking Systems and Visibility: This uses technology like barcodes, RFID, and IoT as inventory monitoring systems to get real-time updates across the supply chain.
- Stock Classification: ABC analysis prioritizes inventory based on value and demand frequency.
- Reporting and Analytics: Provide real-time data on stock performance to support decision-making and improve inventory management.
Inventory Control vs Inventory Management
Inventory management and inventory control are closely related, but they each focus on different aspects of handling stock.
Exploring the Types of Inventory Control System
Inventory control systems have come a long way, from basic spreadsheets to incorporating machine learning for better automation. The two main types of inventory control systems—periodic and perpetual—each offer unique benefits, depending on your business needs and inventory types.
Perpetual Inventory Control System
A perpetual inventory control system provides real-time inventory tracking. Whenever a product is sold or received, it’s scanned and immediately updated in a centralized database. This system gives all parts of the business access to the same up-to-date inventory information, offering a detailed view of inventory changes without the need for manual counts.
If your business has high sales volumes or multiple locations, controlling inventory with this system is perfect for you. It provides an accurate snapshot of inventory levels at any given time. However, it can be costly to maintain and may not catch discrepancies like theft or scanning errors.
Periodic Inventory Control System
A periodic inventory control system relies on regular, scheduled counts of goods instead of constant tracking. Businesses using this system manually count their stock—usually on a monthly, quarterly, or yearly basis—depending on their needs. While this approach doesn’t require fancy tech or equipment, it does mean that inventory numbers are only accurate right after the physical count. If you're trying to fill orders in between counts, you might run into problems since the exact stock levels aren’t updated in real-time.
This system is straightforward and manageable for small businesses with minimal inventory. However, for larger businesses or those with a wide range of products, it can be time-consuming and prone to human error. Periodic systems work best for smaller operations or companies dealing with niche products or larger, fewer items that are easier to track manually.
Inventory Control Methods You Should Know
Inventory control relies on various techniques to track and manage stock movements efficiently. Popular methods include ABC analysis, LIFO and FIFO, Just-In-Time (JIT) systems, and the Three and Two Bin Systems. Other inventory control examples are Economic Order Quantity (EOQ) and safety stock. Below, we’ll explore how these approaches work and how they can benefit your business operations.
ABC Inventory Control System
ABC analysis is a handy inventory management method that helps prioritize items based on their importance to your business.
Last In First Out (LIFO)
Last In, First Out (LIFO) is a way of managing inventory where the most recently added items are sold or used first.
First In First Out (FIFO)
First In, First Out (FIFO) is a method for managing inventory where the oldest stock is sold or used before the newer items.
Just-In-Time (JIT) Inventory Control System
Just-in-time (JIT) is an inventory management approach where businesses receive goods from suppliers only when they’re needed. The goal is to minimize storage costs and keep inventory moving efficiently.
Three Bin System Inventory Control
The three-bin system is a visual inventory management method that stores a product in three separate bins. When one bin is empty, it serves as a clear signal to reorder stock, ensuring a steady supply. This simple yet effective system aligns with Lean Manufacturing and Kanban principles to streamline inventory control.
Two Bin System Inventory Control
The two-bin system is a straightforward inventory control method for managing stock replenishment. It works by dividing items into two bins: when the first bin is emptied, it signals the need to place a reorder. The second bin holds enough stock to cover the time it takes for the new order to arrive, ensuring there’s no interruption in supply.
What Are the Advantages of Inventory Control System?
What do you get from implementing an efficient inventory control system? Let’s look at some of the benefits:
- Real-time Accuracy: Track inventory levels instantly to avoid stockouts and overstocking.
- Cost Savings: Reduce storage, insurance, and excess stock costs while minimizing lost sales.
- Smoother Operations: Automate manual tasks and optimize your supply chain workflow.
- Improved Customer Experience: Meet customer demands with accurate stock availability and timely deliveries.
- Enhanced Efficiency: Free up working capital and improve cash flow by maintaining optimal stock levels.
- Data-Driven Decisions: Access real-time analytics to make smarter, proactive decisions.
- Error Reduction: Minimize inaccuracies caused by manual tracking or theft.
Optimize With Packagex’s Automated Inventory Control System
Our inventory control system software provides several key benefits that significantly improve warehouse operations. First, it ensures real-time tracking of stock levels as items are received, processed, and stored, guaranteeing that inventory data is always accurate and up to date. The system also streamlines data entry by automatically capturing item information, which reduces the chances of human error. You will also have a simpler verification process, allowing for easy tracking of incoming goods, capturing defective items, and recording serial numbers or special handling tags.
PackageX’s automated inventory control solution has a smart layout organization feature that assigns items to warehouse locations, either automatically or manually, making it easier to find and access products quickly. With advanced search and filtering options, users can efficiently locate orders and items using metadata, tracking numbers, and other criteria. To top it off, comprehensive reporting capabilities generate detailed insights into damages, shortages, and received quantities, ensuring clear communication with stakeholders. Ultimately, this modernized system saves time, enhances accuracy, and allows teams to focus on higher-level tasks while maintaining full control over warehouse operations.
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FAQs
What type of inventory control system is typically used in a staple merchandise category?
Staple merchandise is usually managed through a continuous replenishment buying system.
Which inventory control system is designed to maintain a running count of the items in inventory?
A perpetual inventory system keeps an ongoing count of inventory by constantly updating stock levels in real time whenever items are bought or sold. This way you always have an accurate picture of your inventory at any moment.
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