Management of your Inventory - « back to Articles
Sellers and Retailers have a common goal, that is to provide the right selection of products, producing maximum sales and profit. Inventory management ensures that you have the right product in stock for the right customer at the right time.
Inventory management is the maintenance of record keeping systems used to keep physical and financial control of your inventory levels. The physical controls help you maintain the right quantities, colours, sizes and styles of goods for your customers. The financial controls help you know how much to buy and the resources you have bound in inventory.
Set Up Controls
You should set up an inventory control system appropriate to the size of your operation. This system should tell you when merchandise comes in, when it goes out, and how much you have in stock. A Management Consultant can help you devise a system that will assist you in collecting suitable inventory information for your company.
Your physical inventory control system should have at least two main parts:
A third which often helps, your knowledge of your own inventory, will permit you to keep a visual check of your inventory.
- perpetual unit control mechanism
- periodic hard physical count
Perpetual unit control is, when ideal, a per business transaction function that records, on a unit basis, the receipt and sales of inventory items. It involves:
You may wish to record inventory movement:
- entering items into inventory from suppliers' invoices and packing slips
- monitoring incoming goods and collecting sales information (from electronic cash registers)
A per business transaction control method lends itself best to a completely electronic system where updates are done via a computer's internal software program. Many of today's POS systems are capable of this type of inventory control. New inventory items can be entered into the data base at any time and are immediately updated. A periodic hard inventory count is still necessary due to human error and possible theft.
- per business transaction
- daily entry
- weekly entry
- monthly entry
Hard Count Inventory
A complete periodical hard physical count of stock is the process known as "taking inventory." Taking inventory is usually a team effort, one person counts the stock while the other records the quantities on inventory sheets or electronic inventory counters. Today there are software programs and bar code readers that will automate the process entirely. The inventory count operation will normally be done at your fiscal year end, before you prepare for your annual financial statements. Better control is achieved if you take inventory quarterly. It is also a way to identify slow moving merchandise.
Your physical inventory control when combined with financial controls will assist you to match merchandise quantities to anticipated sales.
A written financial control should account for opening monthly balances and purchases while comparing them to your planned sales. This comparison will assist you to avoid being over or under stocked.
Written controls will assist you to determine how much merchandise you can afford and whether you should make adjustments to your sales plans.
With physical and financial inventory controls in place your system should tell you:
Inventory control is a necessary part of good retail management and is vital to the ongoing success of your business.
- when projected sales are not met
- when your stock levels are too high or low for the sales level
- when your goods are turned over slower than you expected
- when your gross profit is slipping