Stock control is critical to keeping a business out of the red. By managing your stock levels and putting measures in place to record stock levels, it is possible to keep a business afloat. While this used to be a manual task, prone to human error, there is now a range of innovative stock control systems you can adopt. Read on to discover how you can implement a new and improved stock management strategy.
What Is Stock Control?
Also referred to as inventory control, stock control is the process of managing all inventory within a business. Right from when the raw material arrives from the suppliers, throughout the manufacturing process and until the stock is shipped on to customers and clients, stock control keeps on top of all necessary stock levels throughout the cycle.
By monitoring all stock levels, it is possible to anticipate and prevent stock shortages and instances of overselling. An efficient stock control system will also help to streamline your business’s logistics, allowing for stock deliveries to be arranged accordingly. For some businesses, by streamlining their inventory control, they are able to readdress how much money they hold in inventory. The implementation of modern stock control systems allows for other areas of a business to be improved, such as warehousing.
Improved stock control management is extremely beneficial to a business, saving considerable amounts of both time and money once a system has been set up.
Methods of Stock Control
There are many different ways to manage and implement stock control. Depending on the nature of your business, different methods will suit your processes. Factors to consider are the size and scalability of your business, as well as your ambitions for growth.
There are two separate branches of stock control methods, implementing a stock control system and enhancing your stock replenishment methods.
1. Implementing Stock Control Systems
For smaller businesses, manual stock control measures are often suitable in the short-term, while the business is within its infancy. Manual methods include simply recording figures by pen and paper, creating a spreadsheet on a computer or using stock cards.
While it is good practice to get into the habit of recording stock levels and keeping track of how these fluctuate throughout the inventory lifecycle, manual stock control is simply unrealistic as a business expands. All of these methods are at risk of human error and as businesses increase the amount of stock they are dealing with, it is very easy for records to go awry.
Therefore, for larger businesses managing and holding larger quantities of stock, a more sophisticated and automated stock controls system is recommended.
Inventory Management Software
There are many different brands of inventory management software available, all at varying levels of complexity. The software will include functions and automation to aid inventory management, including tools to support
- Purchasing Stock
- Product Tracking
- Product Turnover
- Storage Figures
- Goods In, Goods Out
- Coordinating Shipping
- Processing Returns
Key Features Of A Modern Stock Control System
To help stock control management, this software offers real-time, perpetual stock tracking, allowing stock figures to automatically update as the inventory moves through the business and orders are received. In doing so, your supply chain cannot be incorrectly affected by outdated or incorrect stock figures.
Real-time syncing allows for all inventory to be tracked across all stages of the stock lifecycles, regardless of where each step is located. Moreover, the end of the journey is also covered as stock control systems can connect with shipping carriers, allowing you to monitor your stock until it arrives at its destination.
In addition, stock control software is able to provide fulfilment documentation, including order, packing slip and delivery notes, as well as invoices. This is due to the software’s advancement to offer automated reordering, helping to reduce friction within purchasing.
This sophisticated software allows companies to integrate multiple warehouses and currencies, supporting businesses of all sizes and customer/supplier reach. It is also able to integrate with additional management and accounting systems, allowing multiple channels to be synced. With all aspects of the business integrated, stock control systems allow for data-driven decisions and reports that further help to produce a straightforward audit trail.
2. Stock Replenishment Methods
The second way to improve stock control is to assess your business’s stock replenishment method. Regardless of the particular method that you choose to implement, all will need to be monitored with an inventory management system.
Fixed Order Quantity
A fixed order replenishment system requires little human involvement, reducing the chance of human error. With this method, there is a set minimum and maximum amount of inventory. Once the minimum level is it, the automated reordering system kicks in to replenish the stock. By establishing a fixed order quantity, reordering will only take place when it is economically feasible. Overstocking on some products more than others is possible, so businesses would need to be aware of this when setting up this system.
Fixed-Period Ordering
Similarly, fixed-period ordering is arranged to allow for inventory to be replenished after a set period of time. However, the quantities of each piece of inventory are not fixed. This system, also called fixed-period deficit ordering, allows for stock levels to fluctuate to take into account seasonal variations.
First In, First Out (FIFO)
Often a preferred method for hospitality businesses, the ‘first in, first out’ method describes a method for loading a warehouse. Any new inventory coming into the warehouse should be stored at the back, allowing older stock to be sold first. Essential with perishable goods, a FIFO system reduces the risk of deadstock eating into profit levels.
Last In, First Out (LIFO)
Opposite to the above method, ‘last in, last out’ stock replenishment prioritises new inventory over old. A LIFO approach allows a business to benefit, especially when costs elsewhere in the business are on the increase. For example, if manufacturing costs are on the rise, the older stock would underestimate production costs, all the while overestimating profits. In these instances, a LIFO system provides a more accurate insight into the company’s earnings.
Just-In-Time (JIT)
Just-In-Time methods take out the need for warehousing. With JIT manufacturing, the stock is arranged to arrive at the point it is needed, exactly when it is required. This process takes out the need to store inventory, reducing the amount of money a business has trapped within raw materials and inventory. While this system sounds cost-effective in theory, it will only work effectively with an accurate stock control system and good relationships with suppliers.
The Two-Bin And Three-Bin System
A two-bin system helps to determine when to order in or produce more stock. Stock is split into two bins, the first holding expended items that need replacing, and the second containing enough inventory to last until the first has been replenished.
A three-bin system, therefore, has an additional store of stock that is saved for a supplier. While the first two bins are held at the manufacturing warehouse, the third is kept with the supplier. The idea behind this system is that the third bin helps to secure production’s flow of inventories.
Understanding Periodic And Perpetual Inventory Systems
When considering stock control, two words that you will often come across within research are ‘periodic inventory’ and ‘perpetual inventory.’
Periodic Inventory
Periodic inventory is often associated with smaller businesses, but it can prove useful for larger organisations. Implementing a periodic inventory involved arranging a physical count of all stock on a regular basis. Carrying out these checks also allows for the cost of goods sold (COGS) to be calculated, a useful figure that allows for your Inventory Turnover Ratio to be calculated. Once counted, these figures can be manually updated.
Perpetual Inventory
In comparison, a perpetual inventory allows for the amount of inventory to be checked continually. Figures are updated in real-time, taking into consideration fluctuations in inventory figures as stock is bought and sold. For businesses looking to expand into multichannel ecommerce, perpetual stock levels are paramount. Periodic inventory simply cannot keep up with the complex fulfilment needs of ecommerce. In addition to stock figures, COGS will also be updated as the data changes.
The Importance Of Implementing Stock Control Measures
By taking the time and effort to implement stock control measures, you can iron out a number of common problems businesses face with inventory management. The first issue these measures can resolve is stocking out on specific pieces of inventory. Running out of stock is not only frustrating for business managers but also customers. Unnecessary stock-outs rapidly affect lead times, and can often lead to order cancellations and a loss of trust in your brand. Of course, there will also be damaging financial losses when inventory runs out.
On the other hand, stock control will additionally help to reduce issues with overstocking and reaching capacity within your warehouse. While this may not sound like a huge problem, your company will have too much capital tied up in stock, restricting its spending in other areas. Similarly, warehousing costs may increase and if your inventory is perishable, money can be lost here too.
Missing stock and theft of stock should be eradicated when all stock is accounted for and tracked. With most stock control systems using QR codes and barcodes to track all inventory, suddenly everything has a visible trail.
Advantages of Modern Inventory Control System
There are many advantages to installing a modern inventory control system into a business, in addition to the cost and time-saving benefits.
Visibility
As we have previously mentioned, inventory control systems allow complete visibility for owners and operators. The entire manufacturing and fulfilment processes are under the spotlight, allowing managers to make decisions based on real-time data and figures. As everything is automatically logged, audits and further evaluations can be conducted in an efficient manner.
Business Growth
Once inventory control systems are in place, there is nothing to stop you from expanding your horizons. The software is able to adapt to multi-channel ecommerce retailing with ease. The real-time stock levels and ordering automation that are built in allow stock quantities to be scaled-up without error. As the system is sophisticated enough to automatically take care of your inventory’s data, it is able to save business owners considerable time when expanding their operations.
Multi-Channel Integration
Stock control software is now so advanced it is able to connect and streamline ecommerce tools and shipping carriers, allowing for all aspects of your business to be linked and managed. This also supports business growth as any changes to your inventory records and data can easily be translated into other areas of the business.
Fewer Returns
With fewer errors in stock figures and product availability, these control systems are able to reduce the number of returns businesses receive from lengthy lead times on products. In addition, as the system keeps meticulous records of what inventory is in stock, it is less likely for the wrong product to be picked for an order, in practice reducing the number of returns from customers receiving the wrong thing.
Streamline Warehouse Management
By updating your stock control and revolutionising the way your company replenishes and monitors its stock levels, it is only logical that these systems integrate your warehouse operations into this process. The automation and real-time updates of stock control software, allow your warehousing to adapt accordingly. This flexibility may require you to hire more staff, fulfil particular orders or rearrange inventory storage as part of your warehouse management practices.
Revamping Your Stock Ordering Process
There are four steps to consider when looking at how to improve your stock ordering process or implement effective stock control. These are:
1. Choose and commit to a single inventory control system – What stock replenishment system works best for your business? Will you benefit more from periodic or perpetual inventory?
2. Evaluate current inventory – What stock do you currently have? Which inventory has the largest gross margin and which are slow-moving?
3. What are your ideal stock levels? – Do you have a maximum or minimum level of inventory? Identify your parameters and remember to work within your limits.
4. Review your inventory control – Continuous evaluation helps your business remain in control of its stock alongside fluctuations in supply and demand, changes to warehousing and storage as well as considerations of marketing and promotion.
What Is The Golden Rule Of Stock Control?
The most important factor of inventory control is determining your business’s optimum amount of stock. Storing large quantities of inventory is not a viable solution as lots of capital is trapped in a warehouse; however, without the correct stock control system, holding no stock can be unachievable for some businesses. Your business needs to find the right balance for them.
JIT manufacturing is feasible and some large car manufacturers opt for this stock replenishment method but this will rely on exceptional logistical organisation and accurate real-time inventory tracking.
How Breakwells Can Help
Whether your business decides to opt for a JIT method or a manageable warehousing method, Breakwells can help. We are a family-owned road haulage and logistics business with over 50 years of experience. In addition to our haulage services, we can support your stock replenishment systems with our warehousing and storage solutions, offering 24 hour CCTV surveillance. Let us help you implement your enhanced stock control measures, find out more today.