As most people who work in retail or e-commerce know, keeping track of inventory levels is one of the most important things to do when doing business. Neglecting this duty can lead to multiple problems, financial, operational, and everything in between.

So, with the importance of a perpetual inventory control system in mind, we’ve created a guide on all the inventory control elements you just have to know as an employer, manager, and worker.

Remember that an accurate inventory control guide has to be applied to a specific business, so our notes will probably be more general than detailed. Although, we’re going to do our very best to not only include the most important things to consider in general but also - create a comprehensive guide on the essential details that every business owner has to struggle with.

Without further introduction, let’s see what we have in store for your inventory control!

Inventory control, stock control, whatever you’ll name it, it’s pretty much the same thing. In short - it’s everything that happens in your business from start to finish. With a small detail of production being cut out of the way.

Let’s say you have a soap-selling company. You’ve created your soap; it’s sitting on the shelves somewhere in the warehouse. Now, what you need to do is to get those soaps to the shops. While doing so, you need to know how many soaps you have and what kind of shops need them. And that is what inventory control is all about.

Keep Track of Your Product

When running a business, you need to keep track of every single element of your inventory, and an excellent inventory control system can do just that for you. As an owner or a manager, you need to know where your products are stored, how many of them you have and how many you need to send out.

The ideal system comprises an entire supply chain, from your warehouse to the final customer. Sometimes, it’s only from your company’s inventory to disposal. That system gives you less control over what’s going on with your product, but it is sometimes the only thing you can get at the time. For example, if you only have enough resources to create a product and store it and you have to rely on an outside provider who will then get your product to the final destination.

Take Everything Into Account

A reasonable inventory control, or as it is sometimes called - stock control - has to consider every little detail. Within that document, you must have information on where your product is, how it is used, and where it is going. That way, you can produce the right amount of product and save money, avoiding inaccuracy. Also, a sound inventory control system can be a great historical document when assessing how many products you need to create in the future.

Optimize Your Profits

The main goal is to optimize your profits, as it is in most businesses. To do so, you’ll need to be thorough and precise. In the end, it can save you a lot of money. Most researchers agree that one of the highest costs of running a retail or related business is production. Most of the companies are creating over 30% surplus of products. Imagine having to spend 30% less on production. With 1000 dollars, it is 700. With a million, it’s 700,000.

Of course, it’s not like you will not have a surplus of products; it’s impossible to accomplish. But, with some tweaks here and there, you can get this number down to 15, or 10% surplus. Proper inventory control can do wonders. And we’re here to help you with it for maximum efficiency and customer satisfaction.

Inventory Management vs. Inventory Control

So, with all those information in mind, you may come to a conclusion - wait, isn’t this whole thing just inventory management? Why is it called differently? Well, it’s similar, but it’s not the same.

Inventory management is a much broader definition. Let’s come back to our soap example. Speaking about inventory management in that regard, we would talk about not only where our inventory is and how much we need to send out but also when to reorder some products to send to the correct warehouse so that you have enough of it in said place.

Inventory control, on the other hand, is more focused on the inventory placement itself. Where is it, how is it stored, and where is it supposed to go? Think of it as checking if you have enough oil in your car. Inventory control will tell you how much oil you have, where it is, and how it should be put in the warehouse, but inventory management will fill it up.

It’s enormous; it’s detailed - it’s a lot. This template is great if you have a lot of stuff to take into consideration. Its best use would probably be for the big companies with many different warehouses and products spread out throughout the country or even a few countries.

You can get this template from SmartSheet.com!

Inventory Control Template #2

Here we have something more basic and user-friendly. Inventory control is where you have the essential elements included, but there is no excessive detail for each part on the template. It can be used for most basic operations. It’s a good inventory control manager for probably 90% of the purposes.

You can get it at SmartSheet.com. 

Inventory Control Template #3

And here is something more on the personal side. It’s not always our company that needs some inventorying. Sometimes it’s our stuff. With that in mind, it’s excellent to use good inventory control procedures for such situations as fire or robbery.

With good inventory control, you can easily track your belongings and check if something’s missing. Download this one from SmartSheet.com as well.

There are plenty of challenges that come with inventory control. Whether it’s something basic like getting the workers to report promptly or just getting everything in order, you will have to face them.

You will not be alone during that, though, as we can all account for our everyday experiences. Most problems and mistakes have already been made, and the first rule of business is that it’s better to learn from someone’s experience than your own. It’s at least cheaper.

So with that in mind, we’ve created a quick list of potential issues you’ll need to keep your eye on as they appear in most retail work environments.

Human Error

The worst nightmare of every business owner that regularly comes back from the grave to get you for not paying enough attention to detail.

The first thing you need to do is just assume that this will happen. Maybe not the first day, not the second, but it will. If you accept that, it will be easier not to get extremely mad at the situation.

Someone will put down a wrong name on the invoice; someone will send the stock to the wrong place; someone won’t notice that you don’t have enough products to send out, and it will cost you.

The inventory control process is critical, and to minimize potential problems, you must educate your employees on how to work with vendor-managed inventory.

You can invest in inventory management software, for example. If something is missing, the system will tell the employee to seek out the issue. As there are plenty of different software, it’s best if you find something suitable for your business by yourself. There will be different ones for organic and building materials, and you’ll have to find out what kind of software is right for your particular type of business.

Information

This is the crucial part of creating a well-functioning business. You need to know a lot about what you have and what you can do it. And - where do you have it?

Acquiring information about how your business operates is crucial for success. You have to know what kind of things you need to replenish, what products sell well and which ones are underperforming.

Unfortunately, keeping up with everything takes a lot of time and attention, so your inventory control plan has to be on point. That is why, no matter the cost, implement it into your yearly budget to ensure that you always have the situation under control. 

To meet customer demand, you need to know what you can offer.

We don’t want to scare you away from investing your time and money into creating a sound system. But, of course, there will always be a lot of challenges to overcome for a business, especially when it comes to retail; those can be a bit problematic in the end. There are a lot of things to take into consideration.

So, if there is a nail, there is a hammer, and here are some hammers that can help you out with usual suspects regarding your business’s inventory.

We based those on our humble experience and current literature on the topic, but if your system needs something completely different as it is unique, be sure to adapt those elements to your benefit. 

Create an Excel Spreadsheet

This one is a no-brainer; you should just start with it. Creating an Excel spreadsheet is the best way to keep track of dates, warehouse inventory, the dates of departures, and where the stock is supposed to go.

The most significant advantage of this spreadsheet is that you don’t have to pay hundreds and thousands for some more advanced system that will do the same. The worst thing about it, though, is that you have to put everything in it by yourself. If something changes, you’ll need to return to your spreadsheet and add it in the right bracket. If something goes right - you do the same thing.

Remember, however you may feel, as a great leader and even better spreadsheet master, you will probably make some mistakes. Especially if your business grows exponentially, just find someone who will do it for you. It will be worth it in the end.

Stocktaking

It is something that you just have to do from time to time. You can do it two ways - periodic or perpetual.

Periodic Inventory

The first one is pretty simple, and you have probably seen it a thousand times. Every few days, weeks, or hours, you make a complete list of all your inventory at the moment using this formula:

You’ll need to see every little thing in your inventory, assign it to the correct label and see if everything is ok. It’s almost impossible if you have a business with thousands of products. 

But, if you have a shop or a small furniture store, it’s completely doable. It’s not the best way, though, as it does not keep you updated constantly but only from time to time. That way, you lose the ability to use current information on what sells and what is being left out to benefit your business. The periodic inventory system is not the best thing people came up with.

Perpetual Inventory

Perpetual inventory control methods are much better for most companies but unfortunately are much more expensive. Using modern technology, you can easily see what can of stock you have by, for example, using motion detection software in your company or sophisticated software that keeps track of every piece of physical inventory that goes out the front door. Inventory tracking is quite essential, for sure.

It’s better, but - as we’ve stated before, it costs a lot of money, and for the smaller business, it’s not that important. For more prominent companies, though - a perpetual inventory system is a must-have.

There are, of course, many other types of inventory control systems you can use, but it depends on what kind of business you’re running. Those two are probably the most important ones.

Use Your As, Bs, and Cs

One of the most common systems used in retail is the ABC analysis. It puts every single item in your inventory into three categories.

A is the highest consumption value.

B is the second best.

C is the lowest consumption value.

Why is it important? Well, you can easily predict that you will have a lot fewer As than Cs, and you will probably primarily store Cs in the end. It’s not like Cs are not important, they are just not as popular as As so they tend to spend more time on the shelf.

How to use it in practice? Well, it’s pretty simple. Keep yours As in a place where it can get rotten faster closer to the exit. That way, you will save money on transport or space.

On the other hand, you can put Cs further from the drop-point, as they are not picked up as often, but you’ll need to have a better way of storing those because of their shelf-life.

Label Everything

This is also very important as it makes the difference between good and bad stock. A great labeling system, you will save yourself a lot of trouble regarding the delivery, organization, visibility of products, and just the overall swiftness of your organization. 

Having a great labeling strategy will also make your employees work less on basic things could surely be avoided thanks to a well-functioning system, saving money, work, and time.

Remember About Reordering

It’s something that does not have to be repeated - a happy customer is the one that comes back. And those that come back should have some special privileges. For example, if you’d consider creating a new spot where a returning customer can freely reorder something, you will benefit significantly from shortening the lead time.

Lead time is the amount of time that passes from placing an order to its finalization. If you know that your customer will be back for a particular product at a specific time, create a way to help him out with it. Whether it’s a special place they can drive to and just pick up the order easily or some special facilities in the app where the orders are being collected, something extra will keep them working with you for decades.

Audit Regularly

Keep an eye on those that keep an eye. And even further. There are plenty of things that can go wrong, and there are even more ways to stop it from happening. The best thing to accomplish it is to simply - prevent it.

Perform audits regularly so that you can be up to date with all the possible problems with your company. People steal, make mistakes, and technology does as well, so there can be spoilage somewhere between your packages. Don’t think it is something unique that happens only in your company, but treat it as a part of the business. And do everything you can to prevent such occurrences.

Thank you very much for checking our guide on how to effectively do inventory control. As you can see, a lot depends on what kind of operation you’re running, so do not hesitate to adjust it to your own needs.

There are so many elements to take into consideration that we just couldn’t put it all into one guide.

Whether it’s livestock, technology, fruits, or even some exotic spices, every single one must be stored differently. And the only common thing between those is that, indeed, it is an inventory, and it must be stored in some way or another.

In the end - you know your business best, so think of those devices like a few good words from someone interested in your well-being.

As usual - if you have any comments or questions, feel free to ask, as we will try to do our best to answer them. And - if you want us to cover any other topic that resides in your mind rent-free - also give us a hint. We will do everything in our power to get you right back on track.